Question : Assertion (A) Central bank as a banker to the banker to the government, works as a financial adviser.

Reason (R) Government borrows internally from banks and the general public.

 

Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)

Option 2: Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A)

Option 3: Assertion (A) is true, but Reason (R) is false.

 

Option 4: Assertion (A) is false, but Reason (R) is true.

Correct Answer: Assertion (A) is true, but Reason (R) is false.

Solution : The correct answer is (c) Assertion (A) is true, but Reason (R) is false.

Assertion is true because the central bank acts as a banker to commercial banks and other financial institutions, which in turn interact with the government. The central bank provides various services to commercial banks, such as maintaining their accounts, providing liquidity support, and acting as a lender of last resort. However, the central bank's role as a financial adviser to the government is not directly linked to its position as a banker to the banks. The central bank advises the government on monetary policy, exchange rate management, and overall financial stability based on its expertise in these areas.

Reason is false. While it is true that the government can borrow funds from banks and the general public through the issuance of government securities, it does not necessarily borrow internally.

The government can also raise funds externally through international borrowing or seek financial assistance from international organizations. The assertion implies that the government's borrowing is limited to internal sources, which is not accurate.

Therefore, the correct answer is (c) Assertion (A) is true, but Reason (R) is false.