Question

Explain banker to the government function of a Central Bank.

Answer 1

As a banker to the government, the central bank performs same functions as performed by the commercial banks to their customers.

1. It receives deposits from the government and collects cheques and drafts deposited in the government account.

2. It provides cash to the government as resumed for payment of salaries and wages to their staff and other cash disbursements.

3. It makes payments on behalf of the government.

4. It also advances short term loans to the government.

5. It supplies foreign exchange to the government for repaying external debt or making other payments.