Central bank

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central bank, functions of central bank, traditional and non traditional function

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Central bank

  1. 1. CENTRAL BANK Central bank is an apex institution in the banking and financial structure of a country. It is called central bank because it occupies a key position in the monetary and banking structure of the country. FUNCTION OF CENTRAL BANK The function of central bank varies from country, but there are contains basic function which are commonly performed by every central bank in the world. These are given below- 1) It issues currency notes of the country 2) It acts as a banker, agent, to the government 3) It acts as banker, supervision, to the commercial banks 4) It acts as the custodian of the foreign exchange reserve of the country 5) It regulates the commercial banks credit creation activities 6) It acts as the lender of last resort 7) It promotes the economics development of the country What are the traditional functions of a central bank? As the apex monetary institution not seeking profit, the central bank of a country enjoys a special status in the money market of the country. Traditionally, it performs the following functions; 1. Issue of the notes, 2. Banker to the Government , 3. Bankers’ bank 4. Lender of the last resort, 5. Control of credit,& 6. Maintenance of the external value of the national currency. What non-traditional functions are performed by a central bank? Many central banks today undertake promotional and developmental role in the context of developing economics. Besides, it seeks to regulate the non-banking financial intermediaries which are fast growing. In India, the Reserve Bank of India has from its inception been helping agricultural as well as industrial development in the country. Developing and reorganizing the undeveloped money market of a country are important non-traditional function of a central bank.

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