Central Bank
Central Bank is a bank which
controls all the banking activity of a country. We also know it as a bank of
the Central Government. This bank holds all the authority to control the
currency system or generating new currency and also decide the monitory &
fiscal policy of the country and credit control by different method. All the
country has a central bank like Reserve Bank of India (RBI), Federal Reserve in
USA or Bank of France in France etc.
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| Reserve Bank केन्द्रीय बैंक |
Functions of Central Bank -
ü Currency
Regulator – central
bank has all the authority to generate the new currency according to the
requirement. But before generate the currency bank should be carefully go the
economic data, inflation or other things. Every bank have different method to
generate the new currency, every bank have a gold stock and foreign currency
so a bank able to generate in a fix ratio (20% - 45%) of the total like
in india, we have a cash reserve of 200 crore (gold of 115cr and foreign
security of 85cr).
ü Custodian
of Cash Reserve – every
bank has a cash reserve and it should be compulsory of all. The amount should
hold by the central bank for daily different bank settlement. Also transfer the
amount from one bank to another.
ü Banker,
adviser for Central Government
– In every country, a central bank play a important role for government to give
a advise on bank policy or fiscal policy or on other related issue. Central
bank also holds the amount of Central Government or State Government but on
such an amount, central government to pay any amount.
ü Manage
the Foreign Exchange
– central bank holds the foreign exchange of any country and also manages it. It’s
also deal with the other central bank and also buy or sell the gold &
foreign currency at market rate. Central bank also fixes the home currency rate
with the foreign currency. Also fulfill all the responsibility as a responsible
member of the IMF.
ü Credit
control – central
bank also fix the different – 2 holding cash ration for commercial bank. These
things play an important role to control the inflation or deflation in the home
market. For example Current Reserve Ratio (CRR), SLR or Bank Rate etc.
ü Clearing
House – central
bank is a clearing house for all the commercial bank. Central bank settles
all the interrelated payment from each other bank because central bank has an
amount of all the commercial bank and it’s become easy to make transfer &
settlement from one bank to another.
