Introduction

The banker to the government term implies the bank responsible for handling the banking and financial matters of the Government. The central bank is the bank that controls the entire bank system of the country. Reserve Bank of India acts as the central bank for India’s central and state governments. It is the responsibility of the banker of the Government to provide advice on financial and banking matters. Reserve bank of India also acts as the banker of banks in India. It is the sole agency responsible for issuing the money and controls the supply of the money in the economy.

Meaning of the term Banker

A banker refers to a person or a body responsible for managing the transactions of other banks or the money deposited to be returned later. The central bank of India is known as the banker of the banks. It is the role of the reserve bank of India as the banker’s bank to facilitate the clearing of cheques between the commercial bank and help the inter-bank transfer of funds. The relationship of a central bank to the other banks is like the relationship between a bank and a customer. 

A banker is a person or a regulatory body responsible for money transactions. It also manages the loans and gives discounts. The central bank, also known as the banker’s bank, keeps a cash reserve for the commercial banks of India. It also gives the facility of taking short-term loans and discounting on bills. It also provides advice on matters related to their business, such as fixation of rate of interests.

A banker to the Government is the central bank responsible for managing all the account transactions of the Government. It receives and gives payments on behalf of the Government whenever necessary. It is the central body responsible for all the banking and financial matters related to the Government. It also provides short-term loans to the Government. It also frames regulatory policies to manage the money market.

Functions of the Banker to the Government

The banker to the Government is the central bank of India, namely, the Reserve Bank of India. It has mainly nine major functions, which are discussed briefly below.

1. Issuing of currency: The central bank is responsible for issuing the currency of India. The notes circulate throughout as the legal tender money. The Reserve Bank of India is not responsible for issuing one rupee note as the government mints issue the coins. The central government is authorised to borrow money from the central bank.
2. Banker to the Government: It is responsible for managing all the money transactions of the Government. The Government also can borrow money from the Reserve Bank of India when necessary. It also advises the Government on financial matters. The central bank gives temporary loans to the government and manages the public debt whenever necessary.
3. Banker’s bank and supervisor: The central bank manages all the country’s commercial banks. As per the rule, commercial banks must deposit money as cash reserves in the central bank, used in emergencies. It also provides advice on business-related matters of the commercial banks.
4. Controller of credit and money supply: The central bank’s main objective in controlling credit is stability with full employability. It controls the credit and money supply by using a monetary policy that consists of two parts- currency and credit. It uses Bank Rate, Open Market Operations and Cash Reserve Ratio as Instruments of monetary policy.
5. Exchange Control Policy: Under the exchange control system, every citizen of the country must exchange their foreign currencies from the central bank of India. And whatever foreign exchange they may need has to be secured from the Reserve bank of India by making an application in the given format. 
6. Lender of Last resort: When commercial banks use all their resources, they approach the central bank as a last resort. The central bank is responsible for providing financial banking accommodation to the other banks in emergencies. It also helps to save the financial structure of the Government.
7. Custodian of foreign exchange and balances: The central bank is responsible for ensuring the external value of the Indian money and the nation’s gold. It keeps a close watch on the management of the exchange control system. 
8. Clearing House Function: The central bank provides the facility of clearing the chequing claims. It provides an easier way for the transfer of funds between banks.
9. Collection and Publication of data: It is also entrusted with transactions and compiling statistical information related to the sectors of the economy.

Conclusion

Banker to the Government plays significant transactions in the country. India plays the role of the banker of the Government of India. It is responsible for matters of financial and banking. Reserve Bank of India has done a good job handling public debt and managing government matters.