CENTRAL BANKING

1. NEED FOR CENTRAL BANKING

2. FUNCTIONS OF CENTRAL BANK
3. ROLE OF CENTRAL BANKING IN A DEVELOPING
ECONOMY
CENTRAL BANK
 CB is the Supreme &Central Monetary
institution of a country established for
promoting the general Monetary Policy of the
Government
 It lies on the top of the pyramid of the
banking structure of a country with wide
powers of supervision and control over all
other banks
 NEED FOR A CENTRAL BANK

 To maintain economic stability

 Control over credit
 Control &supervision over the activities of
other banks
 Proper execution of monetary policy
 Special role of the CB in a developing
economy
 Foreign exchange regulations & international
dealings(IMF,BIS)
 CONTROL OVER MONET SUPPLY
 REGULATION OF INTEREST RATES
 ENJOYS MONOLPOLY POWER REGARDING THE
ISSUE OF PAPER NOTES AND RATE OF
INTEREST
FUNCTIONS OF CB
 Control over bank credit
 Monopoly of note issue in accordance with
the existing legal procedures
 The banker to the g
 Keeps the cash balances of the government
and maintains the accounts
 It gives the advances to the government
 Manages public debt &advises the
government on various financial matters
 Bankers‘ bank
 Lender of last resort in emergency situations
 Custodian of the nation’s gold and foreign
exchange reserves
 Maintenance of foreign exchange rates.
 Exchange control
 Maintains the stability of the value of money
 Strengthening the banking structure
 Special role in a developing
ROLE OF CB IN DEVELOPING
ECONOMY
 Expanding currency supply for financing
development plans
 Resource mobilization
 Provision of adequate credit
 Controlling inflation creation of strong
infrastructural facilities
 Increasing the flow of bank credit to the
priority sector

 Finance to agriculture
 Finance to industries
 Finance to SMEs
 Finance to self employment
 Operating exchange control
 Development oriented monetary policy
 Developing sound banking structure
 Advising the government on plan matters
 Conducting economic surveys
 Collection of basic statistics