Question

At what rate government gives loan to state governments

Answer 1

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Answer 2

RBI Acts as banker to Central Govt and State Govts.

RBIs assistance to Govt of India is divided into two half years.This is discussed with Govt of India and finalised before budget.

The sources of funds for lending to Govt are from deposits maintained by Banks in Deposit Accounts Department of the Bank .Each bank has got primary and secondary accounts.Most of the banks have deposit accounts with all offices of RBI .Another source of fund for RBI is state govt deposits .State and Central Govt deposits are consolidated and maintained by Public Accounts Departments ,Agency Banks and consolidated at RBI Central Accounts Division at Nagpur .

The Central and State Govt accounts are monitored by RBI Department D GBA ,-Department Bank and Govt accounts at Mumbai Central office.

Many state govts have surplus deposits with RBI

RBI gives loans to state govts as

1.Ways and Means Advance

2.Special Ways and Means Advance

3.Overdraft for 10 days .

The quantum of advances is mutually decided based on various parameters and as a multiple of minimum balance

Reserve Bank is not printing notes to give loan to Govt .The bank has got own resources.

RBIone of the items of income is interest earned on loans and advances to State Govts.