The Reserve Bank is banker to every State and Union Territory except Sikkim

Background

The Reserve Bank of India Act, 1934 requires the Central Government to entrust the Reserve Bank with all its money, remittance, exchange and banking transactions in India. Under Sections 20 and 21 of the RBI Act, 1934, the Reserve Bank has an obligation and a right respectively to accept monies for the account of the Central Government and to make payments up to the amount standing to the credit of its account. Under Section 21A the Bank may, by agreement with the Government of any State, undertake all its money, remittance, exchange and banking transactions in India; as of now the Bank is banker to all the States and the Union Territories in the country, except for the State of Sikkim. It provides Ways and Means Advances, a short-term interest-bearing advance, to the Governments to meet temporary mismatches in their receipts and payments, and gives State Governments a Special Drawing Facility, Normal Ways and Means Advances and Overdraft. Final compilation of Government accounts, of the Centre and the States, is done at the Central Accounts Section, Nagpur office of the Reserve Bank. Under section 45(1) of the RBI Act the Reserve Bank may appoint any scheduled bank as its agent for Government banking business, and the Department of Government and Bank Accounts issues the general guidelines for opening the current accounts that banks maintain with the Reserve Bank. As Banker to Banks the Reserve Bank also acts as the lender of the last resort to a bank that is solvent but faces temporary liquidity problems.