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Central Bank also performs commercial banking business. - False

Explanation: Commercial banking business implies accepting deposits from and lending deposits to the general public. The Central bank does not deal directly with the general public and does not perform any of the commercial banking functions.

Bank Rate is the selective credit control measure used by the Central Bank of the country. - False

Explanation: Bank Rate refers to the rate of interest at which the central bank lends money to the commercial banks or the rate at which the central bank discounts the bills of the commercial banks. This is classified as a quantitative measure of credit control since it directly affects the market interest rate and thereby the money supply in the economy.

Central bank has the monopoly of note issue.

Explanation: In India Central bank has the sole authority to issue currency notes. The central bank backs the currency it issues.

All the commercial banks are mandatorily required to keep a certain percentage of their deposits, other than cash reserve ratio (CRR), with the Central Bank. The Central Bank acts as a clearing house for the commercial banks. As a clearing house, it settles inter-bank claims and reduces the need for cash reserves by the commercial banks.

According to Prof. Samuelson “Central Bank is a bank of bankers. Its duty is to control the monetary base, through the control of high powered money, to control the community's supply of money.”

Central bank is the apex body of the monetary and banking systems of the nation's economy.

Explanation: The Central Bank is the apex institution of a country's economy. It regulates and controls the activities of all the commercial banks and other financial institutions in the country. It plays a pivotal role in the organisation and development of a sound monetary and financial system in an economy.

The Central Bank is the sole entity that can print currency notes. In other words, the central bank of a country has the exclusive authority to issue the currency (notes + coins). The currency issued by the central bank is known as 'legal tender money' i.e. the value of such currency is backed by the central bank. Since, issuance of notes is exclusively reserved for the Central bank, it is said to be the ‘Bank of Issue’

A persuasion technique followed by the central bank to pressurise the commercial banks to abide by the monetary policy is termed as moral suasion. This involves meetings, seminars, speeches and discussions, which explain the present economic scenario and thereby persuade the commercial banks to adapt the changes needed.

Bank Rate is also called as rediscount rate

Explanation: Bank Rate refers to the rate at which the Central Bank lends money to the commercial bank or the rate at which the Central Bank discounts the bills of the commercial banks. This rate is also called the rediscount rate.

The central bank acts as a custodian of cash reserves of the country.

Explanation: Individuals deposit their money in commercial banks. The commercial banks in turn are legally bound to deposit a certain portion of these deposits with the Central Bank. Thus, the Central Bank acts as a custodian (keeper) of the cash reserves of the country.

he Central Bank is the apex institution of a country's monetary system. It regulates and controls the activities of all the commercial banks and other financial institutions of the country. It plays a pivotal role in the organisation and development of a sound monetary and financial system in an economy. In India, the Reserve Bank of India (RBI) is the central bank. The following are some of the definitions of central bank. According to Prof. Paul.

A Samuelson “Central bank is a bank of bankers. It’s duty is to control the monetary base and through the control of high powered money to control the community’s supply of money” According to Prof. Hawtrey “ Central Bank is that which the lender of last resort”.

CRR or the Cash Reserve Ratio refers to the minimum amount of funds that a commercial bank has to maintain with the Reserve Bank of India in the form of deposits. For example, suppose the total assets of a bank are worth Rs.200 Crores and the minimum cash reserve ratio is 10%, the amount that the commercial bank has to maintain with RBI is Rs.20 Crores. If this ratio rises to 20%, the reserve with RBI increases to Rs.40 Crores. Thus, less money will be left with the commercial bank for lending. This will eventually lead to considerable decrease in the money supply.

Margin requirement implies ascertaining the value of the loan that can be granted upon the mortgage of a certain security. The banks keep a margin, which is the difference between the market value of a security and its loan value. For example, a commercial bank grants loan of Rs 80,000 against security of Rs 1,00,000. So, the margin is calculated as Rs 1, 00,000 – Rs 80,000 = Rs 20,000.

A rise in the margin requirement discourages loans. Accordingly, when the central bank decides to restrict the flow of money, then the margin requirement of loan is raised. This is referred to as ‘Regulation of Margin Requirements’.

No, the given statement is not correct. This is because it is the Central Bank that acts as the lender of last resort for the commercial banks and the government. When a commercial bank faces financial crisis and fails to obtain funds from other sources, the central bank plays the vital role of ‘lender of last resort’ and provides them with financial assistance in the form of credit.

Central Bank acts as a banker to the government. On behalf of the government, the Central Bank buys and sells government securities, maintains its books of accounts, manages its public debt and also grants loans and advances to the government. Thus, as a banker to the government, the Central Bank transfers government funds by accepting receipts and making payments on behalf of the government.

Yes, the above statement is true. The Central Bank is the sole entity that can print currency notes. In other words, the central bank of a country has the exclusive authority to issue currency (notes + coins). The currency issued by the central bank is known as 'legal tender money' i.e. the value of such currency is backed by the central bank. Since, issuance of notes is exclusively reserved for the Central Bank, it is said to be the ‘Bank of Issue’.

The following are the various measures of quantitative credit control:

i. Bank Rate - Bank rate refers to the rate at which the central bank provides loans to the commercial banks. This instrument is a key at the hands of RBI to control the money supply. Changes in the bank rate change the cost of borrowings, thereby affect the money supply. An increase in the bank rate decreases the money supply and vice-versa.

ii. Open Market Operations (OMOs) - OMOs refer to the buying and selling of securities either to the public or to the commercial banks in an open market to affect the money supply in the economy. The selling of securities by RBI will wipe out the extra cash balance from the economy, thereby limiting the money supply, whereas in the case of buying securities by RBI, additional money is pumped into the economy stimulating the money supply. 

iii. Cash reserve ratio (CRR) - It refers to the minimum proportion of the total deposits that the commercial banks has to maintain with the central bank in form of reserves. An increase in the CRR, would mean that banks are required to keep a greater portion in form of deposits with the central bank and the commercial banks are left with lesser amount of funds to lend out. Hence, the lending capacity of the banks is reduced, leading to fall in the money supply. On the contrary, a fall in CRR will lead to an increase in the money supply.

Commercial banks have to mandatorily deposit a fixed percentage of their deposits with the Central Bank. The Central Bank uses this money to settle the claims of one bank by the other. In other words, the Central Bank undertakes transfer of funds from one bank to the other to settle inter-bank claims. In addition to this, the Central Bank also buys and sells securities on behalf of the government.

By buying securities, it transfers money from the government’s account to the account of the security holders. Similarly, when it sells securities, it transfers money into the government’s account. Thus, in these ways, the Central Bank (RBI) transfers money from one place to the other.