Q.7 Indicate the different functions of a
Central Bank.
A Central bank performs many
important and essential functions which are described as follows:
MONOPOLY OF
NOTE ISSUE
Formerly in certain countries, many
banks issued their own notes. This resulted in uncontrolled confusion. Hence,
gradually the right of note issue was withdrawn from ordinary banks. Note issue
became the sole privilege of the central bank. Today the central bank in every
country enjoys the exclusive privilege of bank note issue.
BANK TO THE
GOVERNMENT
This functions of a central bank may
be studied under the following two heads.
As Banker To
The Government
As governments banker, the central
bank keep the deposits or banking accounts of government departments boards and
enterprises. It advances short term loans to the government in anticipation of
collection of taxes or the raising of loans from the public. It also makes
extra-ordinary advances during depression, war or other national emergencies.
As An Agent
Of The Government
As an agent of the government the
central bank is often entrusted with the management of the public debt and
issue of new loans and treasury bills on behalf of the government. Moreover the
central bank is the fiscal agent to the government and receives taxes and other
payments into its account.
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