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Functions of the Central Bank

The central bank is recognized as the most powerful financial institution. It is considered to be an important part of a country’s economic and financial structure. It is an independent authority in charge of supervising, regulating, and stabilizing the country’s monetary and banking framework. The Reserve Bank of India is the country’s monetary authority. It was founded in 1935. Central banks are in charge of ensuring the country’s Financial Stability and Economic sovereignty.
The meaning of monetary authority is a financial institution that has the privilege of producing and distributing money for a country or a group of countries. The monetary authority, in the modern economy, is also responsible for regulating member banks and formulating monetary policies. This article will acquaint you with the importance of the monetary authority with a focus on the functions of the central bank of India.

Features of Central Bank

The basic nature of Central banks is that they are non-market-based and also anti-competitive institutions. The key features are:

  • Most central banks are centralized though there could be central banks that are not government agencies.
  • Even if the central government does not own a central bank, the law establishes and protects the privileges of a monetary authority.
  • It has a legal monopoly status that enables it to issue cash and banknotes as opposed to private commercial banks that can issue only demand liabilities, for example, checking deposits.

Functions of Central Bank

  1.  Currency regulator or bank of issue
  2. Bank to the government
  3. Custodian of Cash reserves
  4. Custodian of International currency
  5. Lender of last resort
  6. Clearinghouse for transfer and settlement
  7. Controller of credit
  8. Protecting depositor’s interests

Examples of Central Banks

Some of the well-known central banks across the world are:

  1. Federal Reserve (USA)
  2. Reserve Bank of India (India)
  3. People’s Bank of China (China)
  4. Bank of England (UK)
  5. European Central Bank (EU or European Union)