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Explain any two functions of the Central bank of the country. |
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Answer» Two functions of the Central Bank of a country are: 1. Issue of currency notes: One of the main function of a central bank is the issue of the legal tender currency notes. The central bank hold monopoly in issue of currency notes. This is necessary to keep uniformity in the note circulation of a country and to avoid the anomaly of over-issue by many banks which are established with the primary motive of earning profit; to confer on currency notes a distinctive prestige so as to command public confidence; and so forth. 2. Credit control: It is also a very important function of a central bank. A country can have foreign exchange stability and price stability only when the central bank of the country exercises its strict control on the credit granting capacity of the banking structure. Hence, credit control by the central bank is necessary. It controls qualitatively and quantitatively the credit granting capacity of the commercial banks. |
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