Question

Explain the key functions performed by a modern central bank in its role as a government’s bank.

Answer 1

The key functions performed by a modern central bank in its role as a government’s bank are followings-

· Modern Central Banks helps government in its money management and various issues related to the Money supply in the country.

· They work like a banker of government and help them in issuing debt

· Central Bank also helps in inflation control of the country

· They formulate the monetary policy of the country, market operation and control of the currency.

· They also work like a banker of banks and regulate the banking system of the country on the behalf of the government.

· Other than that the central banks also work as a clearing house for the checks which are written by the domestic banks.

· The Central banks of also manage the foreign exchange rates of their national currency and foreign exchange reserve of the country.