Question

Bonjour

Explain any 4 functions of central bank.​

Answer 1

Answer:

Hey mate here is your answer.

Eight major functions of central bank in an economy are as follows:

(1) Bank of Issue,

(2) Banker, Agent and Advisor to Government, (3) Custodian of Cash Reserves,

(4) Custodian of Foreign Balances,

(5) Lender of Last Resort,

(6) Clearing House,

(7) Controller of Credit, and

(8) Protection of Depositor's Interest.

Answer 2

FUNCTIONS OF CENTRAL BANK ARE:--

(i) Bank of issue:

Possesses an exclusive right to issue notes (currency) in every country of the world. In the initial years of banking, every bank enjoyed the right of issuing notes.

(ii) Government’s banker, agent, and advisor:

Implies that a central bank performs different functions for the government. As a banker, the central bank performs banking functions for the government as commercial banks performs for the public by accepting the government deposits and granting loans to the government. As an agent, the central bank manages the public debt, undertakes the payment of interest on this debt, and provides all other services related to the debt.

As an advisor, the central bank gives advice to the government regarding economic policy matters, money market, capital market, and government loans.

(iii) Custodian of cash reserves of commercial banks:

Implies that the central bank takes care of the cash reserves of commercial banks. Commercial banks are required to keep certain amount of public deposits as cash reserve, with the central bank, and other part is kept with commercial banks themselves.

(iv) Custodian of international currency:

Implies that the central bank maintains a minimum reserve of international currency. The main aim of this reserve is to meet emergency requirements of foreign exchange and overcome adverse requirements of deficit in balance of payments.

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