CENTRAL BANK

Presented by: Group 7

Ankit Kumar(007)
Gayatri Sharma(019)
Kritika Poddar(031)
Ravi Agarwal(042)
Suchita Khanna(054)
Vijay Singh(067)
 CONTENTS
 Introduction
 Terminology
 Functions of Central Bank
 Credit Control Measures
 Limitations of Credit Control Measures
 Conclusion
 INTRODUCTION

Definition:-

Central bank is the apex

institution in the banking and financial
structure of the country.
 DIFFERENCES BETWEEN
CENTRAL AND COMMERCIAL
BANKS

 Profit
vs. Non Profit Institution
 Function
 Ownership
 One vs. Many
 TERMINOLOGY

 Cash Reserve Ratio (CRR)

 Statutory Liquidity Ratio (SLR)
 Bank Rate
 Repo Rate
 Reverse Repo Rate
 FUNCTIONS OF CENTRAL BANK

 Traditional Functions

 Promotional Functions and

 Supervisory Functions
 TRADITIONAL FUNCTIONS

 Monopoly of Note Issue

 Central Bank as Banker, Fiscal Agent and

Advisor to the Government

 Bankers’ Bank

 Lender of the Last Resort

 TRADITIONAL FUNCTIONS
Contd…

 Custodian of Foreign Exchange Reserves

 Controller of Credit

 Central
Clearance, Settlement and
Transfer
 PROMOTIONAL AND
DEVELOPMENTAL FUNCTIONS

 Encouragement of Banking Habits

 Strengthening Financial Structure

 Allocating Credit for Different Sectors

 SUPERVISORY FUNCTIONS

 Licensing

 Branch Expansions

 Others
 CREDIT CONTROL
MEASURES
 Quantitative
Methods:
These methods are used to control the
volume and cost of credit.

 Qualitative Methods:
These methods are used to control the
distribution of credit.
 QUANTITATIVE METHODS

 Bank Rate Policy

 Open Market Operations

 Cash Reserve Ratio

 Statutory Liquidity Ratio

 QUALITATIVE METHODS

 Regulation of Consumer Credit

 Credit Rationing
 Regulation of Margin Requirements
 Moral Suasion
 Direct Action
 LIMITATIONS OF CREDIT
CONTROL MEASURES

 Limitations of Bank Rate Policy:

1. Interest rates charged by
commercial banks are not automatically
linked to the bank rate.
2. More emphasis on agricultural and
small scale industries.
 LIMITATIONS OF CREDIT
CONTROL MEASURES contd…

 Limitations of Open Market Operations:

1. Economic and Political Uncertainty

2. Release of money from Hoarding

 CONCLUSION
The Central Bank is a monetary authority
of the country and has to function in a
manner so as to promote economic
stability and development.