Functions of Central Bank Central bank is an important organization for any country.

It performs traditional and developmental role to accomplish macro-economic objectives. This includes currency issuance, regulation of liquidity, supervision of banks and secondary markets, exchange rate management, balance of payment, establishment and development of financial institutions. Central bank is the center of banking system of any country and has sole authority to control and regulate the supply of money. Central bank controls the supply of money by keeping the welfare of people in mind as primary object. Functions of central bank are discussed in detail below. Monopoly over Issuing Currency The primary function of central banks is to issue money in the country. Central bank issue currency notes by following certain regulations enforced by the state. There are different requirements which central bank need to fulfill for this purpose, one important prerequisite is keeping reserve against issued money. Some important advantages for this sole authority are: - Credit creation by commercial banks can be checked and controlled by central bank. - Central Bank has the confidence of people as it has the government backing and recognition. - As the sole authority of issuing currency there is uniformity in the countrys currency. - Government can use this sole authority for the best interest of people. Government Agent and Advisor It acts as the government bank and agent, to collect and pay transactions on behalf of the government. Central bank has a detail record of all monetary issues and present in good position to advise government for monetary, banking and financial issues. Bankers Bank It is the bank for all commercial banks and monitor and control all commercial banks by its regulations. Commercial banks keep reserves with central bank as a requirement. Central bank also helps commercial banks in their daily business life by providing loans, security to cash reserves and gives them advice on financial and economic issues. Clearing House Another important function central bank does for commercial banks is acting as a clearing house for settle all the bill and checks drawn one another. Lender of the Last Resort Central bank helps commercial banks when they face any crisis, central bank come to rescue by advancing loans and bailout packages. Credit Control Credit Control becomes an emerging vital function of Central Banks. Although monitoring and controlling credit been always a function of central banks but as the technology grew and use of plastic and e-transaction is becoming more common there are many sensitive monetary issues arises. Central Banks take

quantitative and qualitative methods for credit control such as bank rate, open market operation and moral situations etc. Financial Agent Central bank works as government agent for foreign exchange and gold transactions. Business Functions of Central Banks General functions of central bank are as follows: 1. Supervision of the banking system 2. Advising the government on monetary policy 3. Issue of banknotes 4. Acting as banker to other banks 5. Acting as banker to government 6. Raising money for the government 7. Controlling the nations currency reserves 8. Acting as lender of last resort 9. Liaising with international bodies Lets look at little brief of some of them: Supervision of the banking system: Central bank supervises the banking system of the country. Central may be responsible for banking system. They collect information from commercial bank and take necessary decision by two ways- a) bank examine and b) bank regulation 2. Advising the government on monetary policy: The decision on monetary policy may be taken by the central bank. Monetary policy refers to interest rates and money supply. The central bank will corporate with the government on economic policy generally and will produce advice on monetary policy and economic matters, including all the statistics. 3. Issue of banknotes: The central bank controls the issue of banknotes and coins. Most payment these day do not involve cash but cheques, standing order, direct debit, credit cards and so on. Nevertheless, cash is important as banks cash holdings are a constraint on creation of credit, as we have seen. 4. Acting as banker to other banks: The Central bank will act as banker to the other banks in the country. As well as holding accounts with international bodies like IMF World bank. It is a common habit for the central bank to insist that the other banks hold non-interest bearing reserves with in proportion to their deposit.

5. Acting as banker to government: Normally a central bank acts as the governments banker. It receives revenues for Taxes and other income and pay out money for t6he governments expenditure. Usually, it will not lend to the government but will help the government to borrow money by the sales of its bill and bonds.

6. Raising money for the government: The government Treasury bill and bond markets are covered by the central bank. While sometimes the treasury or ministry of finance handle