How does Reserve Bank of India discharge its statutory obligation of being 'Banker to Government'?

How does Reserve Bank of India discharge its statutory obligation of being 'Banker to Government'?

RBI carries out the general banking business of the governments through its own offices and commercial banks, both public and private, appointed as its agents. Section 45 of the Reserve Bank of India Act, 1934, provides for appointment of scheduled commercial banks as agents at all places or at any place in India, for purposes that it may specify, “having regard to public interest, convenience of banking, banking development and such other factors which in its opinion are relevant in this regard”.

Reserve Bank of India maintains the Principal Accounts of Central as well as State Governments at its Central Accounts Section, Nagpur. It has put in place a well-structured arrangement for revenue collection as well as payments on behalf of Government across the country. A network comprising the Government Banking Divisions of RBI and branches of agency banks appointed under Section 45 of the RBI Act carry out the government transactions. At present all the public sector banks and select private sector banks act as RBI's agents. Only designated branches of agency banks can conduct government banking business.

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