Definition of Central Bank

Definition of Central Bank

The development of central bank has made a revolutionary change in the banking sectors. To make a strong monetary system central bank has established. To regulate the money market and all commercial banks, the central bank is employed by the government.

The bank which is established for the purpose of leading the banks and the monetary system, under the direct control of the government, as a symbol of economic independence and sovereignty is called a central bank. In modern economies, the central bank is usually responsible for the formulation of monetary policy and the regulation of member banks. This bank is worked solely and regulates the economic system of a country.

For the betterment of economy and maintain the value of money, a government established this bank under own control. It is unique and works as the parent of the economy of a country.

Economist and scholars define central bank by their own view-

H. Collin: “Central bank is the main government-controlled bank in a country, which controls the financial affairs of the country by fixing main interest rates, issuing currency, supervising the commercial banks and controlling the foreign exchange rate.”

Hawtray: “Central bank is the lender of the last resort.”

Prof. Kisch: “A central bank is a bank whose essential duty is to maintain the stability of the monetary standard.”

After analyzing above all discussions we can say –

  • The main purpose of this bank is to develop the economic condition.
  • Issuance of note is the sole duty of central bank.
  • This is the peak institution of the financial and banking institution.
  • It has given the duty to lead the total economic system.
  • It is the banker of other banks.
  • The fundamental task is of controlling the monetary policy.
  • It maintains the equity in the economy and keeps the standard value of money.

The government establishes the central bank to govern the whole economic system. So, the ultimate goal of the central bank is to do all necessary works for the betterment of the country.