Which of the following is the function of Central Bank of the country?
a. Issue Currency.
b. Lender's last resort.
c. Control of credit.
d. All of these.
Answers
Answer:
As the apex institution in the monetary system of a country the central bank’s functions are :
a) Currency Authority – The central bank is the sole authority for the issue of currency in the country - its monetary liability. The central govt. also borrows from it.
b) Banker to Govt. – The central bank carries out all the banking business of the govt. and manages public debt.
c) Bankers’ Bank and supervisor – All the commercial banks keep a part of their cash reserves with the central bank, which is used as an instrument of monetary and credit control. It also provides clearing and remittance facilities. This bank also supervises, regulates and controls the commercial banks.
d) Controller of money supply & credit – Credit is an important element of the money supply. The central bank controls the supply of credit through quantitative measures and qualitative measures.