Explain the “bankers’ bank” function of the central bank.

1.	Explain the “bankers’ bank” function of the central bank.
Answer» Central bank serves as a bank to other commercial banks and its relation with other banks is akin to the relation of commercial banks with their customers. Central bank acts as a banker’s bank in following three capacities : 1. Central bank is the custodian of the cash reserves of the commercial banks. 2. Central bank is the lender of the last resort. 3. Central bank acts as a bank of central clearance, settlement and transfers.

Answer»

Central bank serves as a bank to other commercial banks and its relation with other banks is akin to the relation of commercial banks with their customers.

Central bank acts as a banker’s bank in following three capacities :

1. Central bank is the custodian of the cash reserves of the commercial banks.

2. Central bank is the lender of the last resort.

3. Central bank acts as a bank of central clearance, settlement and transfers.

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Explain the “bankers’ bank” function of the central bank.

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