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Deposit Transaction between Government and Central Bank

In last page, we studied that

Commercial banks deposit their surplus funds with Central Bank

Sometimes

Government also deposit their surplus funds with Central Bank

Different Deposits of Central Bank (RBI) - Teachoo.JPG

Deposits of Government with Central Bank - Teachoo.JPG

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Different Deposits of Central Bank (RBI) Deposits of Commercial Bank With Central Bank Deposits of Government Bank With Central Bank Commercial banks deposit their surplus funds with Central Bank Government deposit their surplus funds with Commercial Bank This we have already studied This we will study now Note Both these deposits are Liabilities of Central Bank Deposits of Government with Central Bank Suppose Government earns Revenue of Rs 1000 Crore from tax and other sources Out of this, It spends Rs 900 Crore on welfare of public So it is left with Surplus of 100 Crore Now, Government deposits these surplus money with Central Bank (RBI) These are called Treasury Deposits Government Revenue Less Expenditure Surplus Treasury Deposits Central Bank Is this Liability or Assets of Central Bank? It is Liability as RBI has to pay back these deposits to Govt

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CA Maninder Singh is a Chartered Accountant for the past 12 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.