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Central Banks - is in charge of supplying currency and...

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Central Banks i) Importance of central banks: Today in every country wherever commercial banks exist, a central bank is a must. Central banks have been established and have come into prominence in the present century. With the progress of the banking business , central banks acquire an essential role. Modern central banks, like the Federal Reserve Bank , the Bank of England, the Reserve Bank of India etc. perform a variety of functions. These functions are placed under three categories: a. To act as a banker to the government , b. To function as a ’ banker’s bank ’, and c. To control the credit supply activity. As a banker to the government the central bank performs a variety of functions. It acts as a government agent in making payments and receiving money on its (the government’s) behalf. It
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Unformatted text preview: is in charge of supplying currency and maintaining fiduciary reserves and foreign exchange reserves. It is the only financial agency that can issue currency. It also has to control the rate of exchange of the currency in foreign trade and maintain the value of currency internally. It needs to provide financial and loan resources and maintain these accounts for the government. As a banker’s bank it acts exactly in the manner that commercial bankers act with their customers. It accepts deposits in the form of statutory reserves from banks. It rediscounts banker’s bills and provides financial assistance to them. It supervises and advises commercial bankers in various respects. Another fundamental function is to control credit created by commercial banks....
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