ECO-Money and banking, page no 138

What are central banks:

A central bank is a national financial institution that manages a country's monetary policy, oversees its banking system, and regulates the money supply. It is typically responsible for maintaining financial stability, controlling inflation, and fostering economic growth. Central banks are independent from the government to varying degrees, allowing them to make decisions focused on long-term economic health rather than short-term political goals. The functions of central bank:

• Monetary policy:

Central banks set interest rates and adjust the money supply to control inflation and economic growth.

• Regulating the money supply:

Central banks issue coins and notes, and regulate how much money is in circulation.

• Supervising the banking industry:

Central banks regulate and supervise banks and financial institutions.

• Managing foreign exchange reserves:

Central banks manage a country's foreign exchange reserves, gold reserves, and government bonds.

• Managing payment systems:

Central banks manage or supervise payment systems and inter-banking clearing systems.

• Providing emergency funding:

Central banks act as a lender of last resort to provide emergency funding to banks.

• Conducting economic research:

Central banks produce studies and reports to advise governments and private organizations.

• Overseeing the inter-bank market:

Central banks ensure that financial laws are respected and that national payment systems are working properly.

• Setting reserve ratios:

Central banks set the reserve ratio for commercial banks.

THE END