Functions of Central Bank.

The essential function of a central bank is the maintenance of the stability of the monetary standard. Mainly central bank was introduced to establish economic discipline in a county through formatting, directing & maintaining banking systems and financial market. Thus, all the necessary activities to create well disciplined economic environment are performed by the central bank. The functions of central bank are expressed with two ways :

A. General functions.

B. Special functions. 

A. General functions :

The following general functions are performed by all the central bank of this world -

1. Issue of coins and notes :

Central bank yet enjoy a complete  individual or monopoly right of note issue on behalf of country. It preserves gold, silver, foreign coins or government security of particular price standard to issue coin & notes. Generally to issue notes, central bank is to preserve 30% reserve of issuing prices.

2. Function as a government agent :

Central bank acts as governments bank. This is why the relation between govt. & itself is more cordial. It performs the following functions as governments agent.

i) Collection of money and bills :

Central bank collects various receivable money & bills of government from different sources.

ii) Maintenance of fund :

The duties of central bank are to perfectly  maintain and reserve the subsisted funds of govt. & the funds obtained  from various sources.

iii) Acts as agent :

On behalf of government it signs & implements contract, performs financial transactions with various persons & organizations within the country & in foreign. Moreover, it acts as agent of government to pay owes & to collect receivable money from various parties.

iv) Advising :

It gives advice &  guidelines to government on foreign trade, financial  principle and prize level. 

v) Revenue collection :

It conserves government revenues collecting from various sources. Central bank keeps a main role to collect govt. revenues.

vi) Transfer :

This bank transfers money and bills from one place to another in county and foreign on necessity of government.

vii) Money payment :

Government  pays all kinds of due with the help of central bank.

viii) Maintaining account :

On behalf of government the duties & responsibilities of this bank are to accumulate, maintain & preserve the accounts of finance collected from different sources.

ix) Issuing loan :

It performs as the huge short term  loan providing organization of government in the financial  crisis moment.

x) Development of relationship :

It develops the better relationship with various countries and organizations such as world bank, IMF, ADB, IDB by continues communication and translation.

xi) Implementation of government monetary policy :

Central  bank in all the countries act as the fiscal agent, banker & advisor in all important financial matters to the governments of their countries.

3. Custody of banks reserve :

Central bank financially reserves a part of collected deposits of another banks to aim at financial stability & credit controlled.

4. Maintaining foreign exchange reserve :

The central bank maintains reserve of international currencies for meeting various requirements of foreign exchange.

5. Lender of the last resort :

Its capacity as bankers bank and the general acceptance of responsibility of lender of last resort.

6. Responsibility as clearing house :

It centrally performs the activities of clearing house in particular time at particular place to settle the daily transactions among the various banks and  the transactions created through various documents and instruments  issued on each other.

7. Credit control :

Commercial bank provides loans for gaining huge profits. But if it is placed in any imbalance condition, then central bank controls credits to keep it on perfect balance positions.

8. Functions as a banker of banks :

Doing the following activities,  central bank do the functions as a banker of banks.

i)  Lawful and financial Assistance in incorporation of commercial and specialized bank.

ii) It includes all commercial banks and financial  institutions into Scheduling so that they should obey its indicated rules and guidelines moreover financial market should be controlled  easily.

iii) Assistance in credit control by changing  laws & principles.

iv) Supervision of loans provided by the various banks of a country.

v) Collection of various information regarding to financial markets and  regularly supply these to the banks.

vi) Audit of accounts maintained into various branches of various banks in a country.

vii) On behalf of commercial banks, it shows itself as a agent in financial  transactions with another banks, financial institutions & traders of own country & foreign.

viii) This bank gives advice to commercial banks on deposit receiving, investment, loan providing  & collection.

ix) Central bank Assists in development of techniques and  introducing  new techniques  for improving the standard of banking service.

B. Special functions :

There are many special functions except general functions are performed by the central bank of every country.

1. Agricultural development.

2. Development of trade & commerce.

3. Industrial development.

4. Development of manpower.

5. Proper utilization of natural resources.

6. Continuing economic research.

7. Information collection and supply.

8. Preparation & publication of report as a guardian of financial market.

9. Keeping price stability.

10. Development of natural resources.

11. Development of hill tract region.

12. Poverty elimination.

13. Development of production project.

14. Housing development.

15. Financial institutions development.

16. Development of management of foreign remittance.

At last it is said that, the  above functions are performed almost by all the central banks of several countries of the world although there may be  variations in degree of functions.