CENTRAL BANK

Presented by: Group 7 Ankit Kumar(007) Gayatri Sharma(019) Kritika Poddar(031) Ravi Agarwal(042) Suchita Khanna(054) Vijay Singh(067)

CONTENTS
 Introduction  Terminology  Functions

of Central Bank  Credit Control Measures  Limitations of Credit Control Measures  Conclusion

INTRODUCTION
Definition:Central bank is the apex institution in the banking and financial structure of the country.

DIFFERENCES BETWEEN CENTRAL AND COMMERCIAL BANKS
 Profit

vs. Non Profit Institution  Function  Ownership  One vs. Many

TERMINOLOGY
 Cash

Reserve Ratio (CRR)  Statutory Liquidity Ratio (SLR)  Bank Rate  Repo Rate  Reverse Repo Rate

FUNCTIONS OF CENTRAL BANK
 Traditional

Functions Functions and Functions

 Promotional  Supervisory

TRADITIONAL FUNCTIONS
 Monopoly  Central

of Note Issue

Bank as Banker, Fiscal Agent and Advisor to the Government Bank

 Bankers’  Lender

of the Last Resort

TRADITIONAL FUNCTIONS
Contd…

 Custodian  Controller  Central

of Foreign Exchange Reserves of Credit

Clearance, Settlement and Transfer

PROMOTIONAL AND DEVELOPMENTAL FUNCTIONS
 Encouragement  Strengthening  Allocating

of Banking Habits

Financial Structure

Credit for Different Sectors

SUPERVISORY FUNCTIONS
 Licensing  Branch  Others

Expansions

CREDIT CONTROL MEASURES
 Quantitative

Methods: These methods are used to control the volume and cost of credit. Methods: These methods are used to control the distribution of credit.

 Qualitative

QUANTITATIVE METHODS
 Bank  Open  Cash

Rate Policy Market Operations Reserve Ratio Liquidity Ratio

 Statutory

QUALITATIVE METHODS
 Regulation

of Consumer Credit  Credit Rationing  Regulation of Margin Requirements  Moral Suasion  Direct Action

LIMITATIONS OF CREDIT CONTROL MEASURES
 Limitations

of Bank Rate Policy: 1. Interest rates charged by commercial banks are not automatically linked to the bank rate. 2. More emphasis on agricultural and small scale industries.

LIMITATIONS OF CREDIT CONTROL MEASURES contd…
 Limitations

of Open Market Operations:

1. Economic and Political Uncertainty 2. Release of money from Hoarding

CONCLUSION
The Central Bank is a monetary authority of the country and has to function in a manner so as to promote economic stability and development.

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