THE CENTRAL BANK

This is a bank whose entire capital stock is
owned by the state. It is for the government
and it is regulated by a board appointed by
government. Central bank is the head of all the
financial institutions in a country.
FUNCTIONS :
1. ISSUES AND REDEEMS CURRENCY : It issues
currency by printing currency notes and mints
coins. It issues currency through the
commercial banks. It redeems worn out or
defaced currencies.
2. BANK TO THE GOVERNMENT :
It keeps government accounts and receives
payments on behalf of the government. It also
make external payments on behalf of the
government.
3. LENDER OF LAST RESORT :
In a banking crisis when people are demanding
their money from the commercial banks, its
become the duty of the central bank to assist
the banking system to withstand such excessive
demand.
4. BANKER TO THE BANKS:
Central bank is the banker to the banks. it
keeps commercial banks accounts and makes
receipts and payments on their behalf.It may
advice commercial banks in areas of economic
participation.
5. IT OPERATES A CLEARING HOUSE : Cheques
from various banks are transacted and settled.
It settles indebtedness between banks.
5. CONTROLS THE MONEY SUPPLY :
It does so through its tool of monetary
controls including the open market
operation,the bank rate, cash ratio, moral
suasion and special directives.

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