Central Bank

Central Bank is the apex financial institution of the country, that administers the operations of
the banking system

Functions of Central Bank

Monetary Authority

The first and foremost function of the central bank is to formulate, execute and monitor the
country’s monetary policy, with an aim of maintaining the price stability, so as to accelerate
growth.

Credit Control

The commercial banks and non-banking financial companies create credit money, which is a
substantial part of the total money supply in the economy. The shortage or excess of the money
supply may have an adverse effect on the economy. So, in this way the central bank comes into
the picture, to regulate the flow of credit, as per the needs of the economy, by using various
methods.

Issue of Currency

One of the basic function of the Central Bank is to issue and exchange currency, as well as
destroy them which are not in circulation.

Custodian:

The central bank plays the role of a custodian, in for safeguarding foreign currency, gold and
other securities.

Clearing Hous

Due to its unique authority, a central bank can deal with domestic and foreign currency and so it
undertakes clearing house operations, settlement of accounts as well as the interbank transfer
of funds.

Other functions

It performs a range of promotional and developmental activities to achieve national objectives.