One of the function of a central bank is that it is "Banker to the government". Which of the following comes under the head?
- Lender of the last resort
- Granting loans and advances to the Cnetre and State Governments
- Advisor to the government
- Agent to the government
Answer & explanation
Correct answer: option 2
The correct answer is option 2: 2, 3 and 4
When we use the term "Banker to the government", it means RBI assist the government in every possible way. The following functions are performed:
- Carrying out all the banking business of the government
- Granting loans and advances
- Managing public debt
- Acting as the advisor and agent to the government
"Lender of the last resort"➔ This is a separate function related to helping commercial banks in crisis, not specifically related to the government's banking needs.