Economics • Banking & FinanceEasy
What is the primary function of the Reserve Bank of India when it acts as the banker to the government?
A. It manages government accounts, floats new loans, and provides ways and means advances to bridge temporary budgetary deficits.✓ Correct Answer
B. It determines personal income tax rates and collects direct taxes from individuals.
C. It formulates the union budget and presents it before the parliament annually.
D. It regulates agricultural crop pricing and manages public distribution system warehouses.
💡 Solution & Explanation
As the banker to the government, the Reserve Bank of India maintains government accounts, receives payments, makes disbursements, and manages public debt issuance. It also provides short-term loans known as ways and means advances to help the government cope with temporary mismatches in receipts and payments. Commercial banks operate under its regulatory purview, while fiscal policy decisions regarding tax rates and budgetary outlays remain the exclusive domain of the central government. The central bank acts as an advisor on economic and financial matters.
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