Central Bank

Central Bank A central bank, reserve bank, or monetary authority is an institution that manages a state’s currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries. . . Functions of Central Bank (Reserve Bank of India) The Reserve Bank of India (RBI) is India’s central banking institution, which controls the monetary policy of the Indian rupee. It commenced its operations on April in accordance with the Reserve Bank of India Act, . The original share capital was divided into shares of  each fully paid, which were initially owned entirely by private shareholders. Following India’s independence on August , the RBI was nationalised on January . . Monetary Authority: It controls the supply of money in the economy to stabilize exchange rate, maintain healthy balance of payment, attain financial stability, control inflation, strengthen banking system. . The issuer of currency: The objective is to maintain the currency and credit system of the country. It is the sole authority to issue currency. It also takes action to control the circulation of fake currency. . The issuer of Banking License: As per Sec of Banking Regulation Act, every bank has to obtain a banking license from RBI to conduct banking business in India. - - Banking . Banker to the Government: It acts as banker both to the central and the state governments. It provides short- term credit. It manages all new issues of government loans, servicing the government debt outstanding and nurturing the market for government securities. It advises the government on banking and financial subjects. . Banker’s Bank: RBI is the bank of all banks in India as it provides loan to banks, accept the deposit of banks, and rediscount the bills of banks. . Lender of last resort: The banks can borrow from the RBI by keeping eligible securities as collateral at the time of need or crisis, when there is no other source.