The central bank acts as the banker to the Government. The Government maintains an account with the central bank just as individuals keep their accounts in the commercial banks. All incomes of the Government are deposited into this account. All the expenses of the Government are incurred out of this account. If necessary, the Government can borrow from the Central Bank. As a fiscal agent, the central bank is in charge of managing the Government’ public debt i.e. it sells Government’ bonds to the public, pays regular interest and repays the loan after the maturity date.
