Central Bank as the Banker of the Government
Central bank plays a crucial role as the banker of the government. It provides various banking services to the government, such as maintaining accounts, managing cash reserves, and facilitating financial transactions. The central bank acts as a custodian of the government's cash reserves and ensures their safety and availability when needed.

Central Bank as the Custodian of Cash Reserves
One of the important functions of the central bank is to act as the custodian of the government's cash reserves. The government deposits its surplus funds with the central bank, which holds and safeguards these reserves. This ensures that the government's funds are secure and can be accessed whenever required.

Role of Central Bank in Mutual Settlement of Claims
The central bank also acts as a clearinghouse for commercial banks. It facilitates the settlement of claims between different banks and ensures the smooth functioning of the banking system. When commercial banks have transactions with each other, the central bank acts as an intermediary to facilitate the settlement of these transactions.

Clearing House Function
The clearing house function of the central bank involves the process of netting out the claims and obligations of different banks. It helps in the efficient settlement of transactions and reduces the need for physical movement of cash. The central bank maintains accounts for commercial banks and settles the net positions of these banks at the end of each day.

Benefits of Central Bank as Clearing House
- Efficiency: The central bank's role as a clearinghouse ensures efficient settlement of transactions between commercial banks. It eliminates the need for physical movement of cash and reduces the time and cost involved in settling transactions.
- Risk reduction: By acting as an intermediary, the central bank reduces the counterparty risk for commercial banks. It ensures that the claims and obligations of different banks are settled in a secure and reliable manner.
- System stability: The central bank's clearinghouse function helps maintain stability in the banking system. It ensures that the settlement of transactions between commercial banks is done smoothly, minimizing the risk of disruptions in the financial system.

In conclusion, the central bank acts as the banker of the government and the custodian of cash reserves. It also plays a crucial role in facilitating the mutual settlement of claims between commercial banks as a clearinghouse. These functions are essential for maintaining the stability and efficiency of the financial system.