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The central bank is the apex monetary institution of the country. Explain its role as a: 

1. Banker of the Government. 

2. Lender of the last resort. 

3. Custodian of foreign exchange reserves.

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1. Central Bank as a banker of the Government: The central bank acts as a banker to the Government. The Government maintains an account with the central bank. All incomes of the Government are deposited into this account and all the expenses of the Government are incurred out of this account. The Government can also borrow from the central bank. Besides, the central bank is in charge of managing the Governments public debt, i.e., it sells Government bonds to the public, pays regular interest and repays the loan after the maturity date.

2. As a lender of the last resort: central bank given financial accommodation to commercial banks by rediscounting their eligible bills at the time of emergencies. It means central bank saves commercial banks from financial crises by providing two types of loans:

1. Rediscounting eligible securities and exchange bills of commercial banks. 

2. By providing loans against their securities.

3. Central bank of a country manages and controls the foreign exchange reserve and gold. It can sell gold to get foreign exchange and also can purchase foreign currencies at international prices.

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