This document discusses central banking and the functions of central banks. It notes that central banks manage a country's currency and money supply. The key functions of central banks include regulating currency, advising governments, overseeing commercial banks, managing foreign exchange reserves, acting as a lender of last resort, and controlling credit. For India, the central bank is the Reserve Bank of India (RBI) which implements monetary policy using tools like repo rates, reverse repo rates, cash reserve ratios, and open market operations. The RBI also issues currency, regulates financial systems and payment systems, and plays a developmental role.

1. Chapter 2: Central Banking
Meaning
A central bank is a public institution that manages
the currency of a country or group of countries and
controls the money supply- literally, the amount of
money in circulation.
Nature
The Central Bank does not aim at profits but aims
at national welfare.
 The Central Bank does not compete with the
member banks.
The Central Bank is generally free from political
influence.

2. Functions of Central Bank
 Regulator of Currency
 Banker and Advisor to the Government
 Custodian of Commercial Banks
 Custodian and Manager of Foreign Exchange
Reserves
 Lender of the Last Resort
 Controller of Credit
 Transfer and Settlements

3. CREDIT CONTROL METHODS
 Bank Rate or Discount Rate Policy
 Open Market Operations
 Variable Reserve Ratio
 Selective Credit Controls

4. RBI AND ITS MONETARY POLICY
Monetary Policy of RBI
There are several direct and indirect monetary policy
instruments that help in implementing the monetary
policy in India.
Repo Rate
Reverse Repo Rate
Marginal Standing Facility (MSF)
Bank Rate Cash Reserve Ratio (CRR)
Statutory Liquidity Ratio (SLR )
Open Market Operations(OMO)

5. Role of RBI
Issuer of Currency
Monetary Authority
Manager of Foreign Exchange
Regulator and Supervisor of the Financial System
Regulator and Supervisor of Payment and
Settlement Systems
Related Functions
Developmental Role

6. BANKING SECTOR REFORMS
Reforms in the banking sector were introduced on the
basis of the recommendations of different
committees:
 The first Narasimhan Committee (1991)
 The Verma Committee (1996)
 The Khan Committee (1997)
 The Second Narasimhan Committee (1998).

7. References
 https://centralbankofindia.co.in/en
 https://www.investopedia.com/terms/c/centralba
nk.asp
 https://inb.centralbank.net.in/#/
 https://www.yourarticlelibrary.com/banking/imp
ortant-methods-adapted-by-rbi-to-control-credit-
creation/23490
 rbi.org.in