BANKING AFFAIRS

Detailed explanation-1: -Currently, the Reserve Bank acts as banker to all the State Governments in India (including Union Territories of Puducherry and Jammu and Kashmir), except Sikkim. For Sikkim, it has limited agreement for management of its public debt.

Detailed explanation-2: -As per Sec 10(26AAA) any income arising to the Sikkimese through any source in the State or through the dividend or interest on securities are not included in the total income. The people are also not subject to Income Tax. This, the RBI had limited agreement to manage the public debt of the bank.

Detailed explanation-3: -Issuing of coins is not a function of the Central Bank.

Detailed explanation-4: -As of now, such agreements exist between RBI and all the State Governments except Government of Sikkim. Thus, the legal provisions vest Reserve Bank of India with both the right and obligation to function as banker to the government.

Detailed explanation-5: -In terms of the Reserve Bank of India Act, 1934, the Bank acts as the fiscal agent and the debt manager to the State Governments by way of mutual agreement. Accordingly, the RBI is the banker to 26 States while it is the debt manager to all the 28 States.