MONEY AND BANKING PART 05
CENTRAL BANK 1. The central bank of a country is it's apex institution of monetary authority. 2. It has the responsibility of designing and maintaining monetary policies 3.Reserve Bank of India is the central bank of the country controlling the monetary policy of Indian rupee.
FUNCTIONS CURRENCY AUTHORITY e Issues currency o Controls volume of currency and credit. o Keeps reserve in the form of gold and foreign security. o Lends money to central government by purchasing the local currency securities.
When the central bank acquires these, it issues currency This helps to monetize the government debt or public debt. Putting and withdrawing money from the circulation is also its function.
2. BANKER TO GOVERNMENT Banker to both the government: central and banker. It carries all the banking functions of the government. Government keeps the cash balance in current account of central bank.
o Central bank accept receipts and make payments on behalf of the government. o It also carries out exchange, remittance and other banking functions on behalf of the government. o Gives loans and advances to the government. e Manages the public debt of the country
3. BANKER'S BANK AND SUPERVISOR : . Regulates the functioning of commercia banks e Lender of last resort. o Bank of central clearance, settlement and transfer o Moral persuasion.
4. CONTROLLER OF CREDIT AND MONEY SUPPLY: This is done by the monetary policy consisting of currency and credit e It can control the volume of currency The main aim is price stability with full employment. The monetary policy consists of quantitative and qualitative instruments