Central Bank

CENTRAL BANK

Presented by: Group 7 Ankit Kumar(007) Gayatri Sharma(019) Kritika Poddar(031) Ravi Agarwal(042) Suchita Khanna(054) Vijay Singh(067)

CONTENTS  Introduction  Terminology  Functions

of Central Bank  Credit Control Measures  Limitations of Credit Control Measures  Conclusion

INTRODUCTION Definition:Central bank is the apex institution in the banking and financial structure of the country.

DIFFERENCES BETWEEN CENTRAL AND COMMERCIAL BANKS  Profit

vs. Non Profit Institution  Function  Ownership  One vs. Many

TERMINOLOGY  Cash

Reserve Ratio (CRR)  Statutory Liquidity Ratio (SLR)  Bank Rate  Repo Rate  Reverse Repo Rate

FUNCTIONS OF CENTRAL BANK  Traditional

Functions

 Promotional

Functions and

 Supervisory

Functions

TRADITIONAL FUNCTIONS  Monopoly

of Note Issue

 Central

Bank as Banker, Fiscal Agent and Advisor to the Government

 Bankers’  Lender

Bank

of the Last Resort

TRADITIONAL FUNCTIONS Contd…

 Custodian

of Foreign Exchange Reserves

 Controller

of Credit

 Central

Clearance, Settlement and Transfer

PROMOTIONAL AND DEVELOPMENTAL FUNCTIONS  Encouragement  Strengthening  Allocating

of Banking Habits

Financial Structure

Credit for Different Sectors

SUPERVISORY FUNCTIONS  Licensing  Branch  Others

Expansions

CREDIT CONTROL MEASURES  Quantitative

Methods: These methods are used to control the volume and cost of credit.

 Qualitative

Methods: These methods are used to control the distribution of credit.

QUANTITATIVE METHODS  Bank

Rate Policy

 Open

Market Operations

 Cash

Reserve Ratio

 Statutory

Liquidity Ratio

QUALITATIVE METHODS  Regulation

of Consumer Credit  Credit Rationing  Regulation of Margin Requirements  Moral Suasion  Direct Action

LIMITATIONS OF CREDIT CONTROL MEASURES  Limitations

of Bank Rate Policy: 1. Interest rates charged by commercial banks are not automatically linked to the bank rate. 2. More emphasis on agricultural and small scale industries.

LIMITATIONS OF CREDIT CONTROL MEASURES contd…  Limitations

of Open Market Operations:

1. Economic and Political Uncertainty 2. Release of money from Hoarding

CONCLUSION The Central Bank is a monetary authority of the country and has to function in a manner so as to promote economic stability and development.