Question

define Central Bank describe the function of Central Bank​

Answer 1

Answer:

Explanation:

Reserve Bank of India (RBI)

Central bank is an apex bank that controls and regulates the entire banking system of a country

The functions of RBI as follows:

1. Issuing currency
2. Banker to the Government
3. Custodian of foreign currency
4. Lender of last resort
5. Control of credit

Explanations:

Issuing currency:

Central bank has monopoly rights of issuing notes. This is called the currency authority function of central banks. All notes issued by the central bank are unlimited legal tender in the country.

Banker to the Government:

Central bank is a banker, agent, and financial adviser to the government. It manages the account of the government, it buys and sells the securities of the government and it frames policies to regulate the money market.

Custodian of foreign currency

he central bank maintains a minimum reserve of international currency all the time in order to meet emergency requirements of foreign exchange and overcome adverse requirements of deficit in the balance of payments.

Lender of last resort:

The central bank also lends money to commercial banks. When the commercial banks are facing a liquidity crunch or any type of insolvency, the central bank is the last resort to provide loans against treasury bills, government securities, and bills of exchange

Control of credit:

The central bank has power to regulate credit creation by commercial banks. The credit creation depends upon the amount of deposits, cash reserves, and rate of interest given by commercial banks. All these are directly or indirectly controlled by the central bank.

Answer 2

Central bank of India is Reserve Bank of India. Important functions of RBI are -

1. Issuance of currency. The currency issued by central bank forms the basis of all the credit creation in the economy.
2. Money supply regulation in the economy through various monetary tools like cash reserve ratio, open market operations etc.
3. Acts as a banker to government.
4. Holds custody of foreign exchage reserves.
5. Guide and bank to other banks of the country. Reserves of Commercial banks are also kept with central bank.
6. Decides limit of credit creation.
7. Funds other commercial banks.
8. Pursuades commercial bank to lend and not to lend.
9. Carries out open market operations on the behalf of the government.
10. Conducts repo and reverse repo operations at various maturities.