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Explain RBI as Banker to Government

Feb 16, 2015 14:12 IST

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.