Explain RBI as Banker to Government
- It transacts all banking business of the government.
- In return, the governments keep their cash balances on current account deposit with the RBI. It provides short term credit to the government.
- The Central government is empowered to borrow through treasury bills any amount it likes from the RBI.
- Thus the Central government is the ultimate monetary authority of the country.
- RBI is responsible for keeping inflationary tendencies under check through controlling the money supply and bank credit.