What Are The Functions Of The Central Bank As A Government's Bank?


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Mahwash Marcel answered
As a government's bank, the central bank performs the following functions:

a. Monopoly of note issue: one of the most important functions of the central bank is to issue currency notes for the country. Earlier this function was performed by the commercial banks individually.

b. Controller of credit: the bank controls and regulates credit money in the country in order to expand or contract it to the requirement of the economy. Credit money is the bank money created by the use of cheques and its expansion or contraction has no direct relation with the amount of currency circulation.

c. Custodian of foreign Exchange: every country exports goods and services to earn foreign exchange. This earned and other foreign exchange is held in the custody of the central bank --- which in turn, uses it to finance the imports.

d. Issue and management of public debts: when the central or the provincial government issues public debts, the central bank, on behalf of it, manages its issue, payment of interests, and retirement.

e. Development of Financial institutions: the central bank is responsible to develop financial institutions, which play a vital role in industrial, agricultural, and capital development of the country. It also facilitates the establishment and running of money markets and stock exchanges.

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