RBI AS BANKER TO THE GOVERNMENT :

In terms of Sections 20 and 21 of the RBI Act, the RBI has the obligation to transact the banking business of the Central Government. Accordingly, it is required to accept money for account of the Government, to make payments on its behalf up to the amount outstanding in the credit of the Government, and also to carry out the Government’s exchange, remittance and other banking operations including the management of the public debt. It acts as an advisor to the Government. RBI performs similar functions on behalf of State Governments by virtue of agreements entered into with them under Section 21A. RBI has entrusted the work of payment and receipts on behalf of Government to its agents like State Bank of India and its Associate Banks. Some other commercial banks are also doing some Government transactions as an agents of RBI.