Functions of a central bank Assignment Help

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Functions of a central bank:

In an economy central bank is supposed to play certain important role. These are as follows:

i) Issues currency and regulates the money supply through the  tools of monetary policy depending on the requirements of the economy.

ii) Act as a banker's bank: that is making loans to commercial banks and as a lender of last resort. This function is useful in preventing bank runs by serving as the lender of last resort to any temporarily illiquid but otherwise solvent bank.

iii) Act as banker to the government: Operating as a fiscal agent for national governments by issuing, servicing, and redeeming government debts. In the times of emergencies central bank also helps in raising government funds to finance these emergency expenditures.  

Cash Reserve Ratio Statutory Liquidity Ratio
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