The central bank acts as a bankers to the govt. both central as well as state govt. It carries out all the banking business of the govt. and the govt. keeps its cash balances on current account with the central bank. The central bank accepts receipts and makes payments for the govt. and carries out exchange, remittance and other banking operations.
The central bank also provides short term credit to the govt. The RBI has also the responsibility of managing the public debt. The central bank also advices the govt. in banking and financial matters.
