Examine The Role of CBN In Facilitating Intermediation And Savings/

Investment .
The central bank is the apex body the banking system.It supervises, coordinates,and
controls the operations and activities of the commercial banks.As their bank it
undertakes the following functions;
(a). Custodian Of Cash Reserves;
It is a legal tradition that all commercial banks should keep a certain portion of
the demand and time deposit with the central bank of the country.This proportion is
called cash reserve ratio.This minimum cash reserve requirement can be changed by
the central bank.The central bank pays interest to the banks on cash reserve ratio
balances.The cash reserve ratio enables the reserve banks of India to advance funds to
banks that faces temporary liquidity crisis.
(b).Lender of last Resort;
The central bank acts as a lender of last resort to commercial banks.Whenever any
commercial bank faces liquidity problems, the central bank provides funds to
overcome crisis.The lender of last resort function of central bank helps to control
panic and infuse confidence among the banks as well as the public.Hence, during
financial difficulties or crisis commercial bank can always depend on central bank for
the required assistance.
(c). Clearing House ;
The central bank acts as a clearing house for transfer and settlement of mutual
claims of commercial banks.Since all commercial banks have their accounts with the
central bank, the claims of banks against each other are settled by simple transfer that
is, by debt and credit entries in their accounts.Thus the interbank indebtedness can be
easily settled without using cash This is possible as banks keep cash reserves with
central bank.

Money Market Is Vital System And Economy.

Required;
(a). Describe The Features Of The Money Market
The following are the general features of a money market;
(I).It is a market purely for short term funds or financial asset called near money.
(Ii).It deals with financial assets having a maturity period up to one year only
(III).It deals with only those assets which can be converted into cash readily without
loss and with minimum transaction cost
(iv). Generally transaction takes place through phones that is,oral
communication.Relevant document and written communication can be exchanged
subsequently.There is no formal place like stock exchange as in the case of a capital
market
(v). Transaction have to be conducted without the help of brokers
(vi)The component of a money market are the central bank, commercial banks,non
banking financial companies, discount houses and acceptance house.

(b). Explain Why Money Market Is important In Banking Within The Economy
(I). Development of Trade And Industry;
Money Market Is an important source of financial trade and industry, as it
provides for short term funds adequately and quickly.The money market, through
discounting operations and commercial papers, finance the short-term working capital
requirement of trade and industry and facilitate the development of industry and trade
both national and international.