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FUNCTIONS OF A CENTRAL BANK

CAIIB EXAM 2022

In this article, we discuss the CAIIB exam Nov 2022 and the dates for the exam to be held in November and December. We will also discuss the functions of a Central Bank and the CAIIB study material nov 2022 that we provide to help you prepare, along with our free short study notes.

CAIIB exam is one of the most prestigious flagship courses offered by IIBF. CAIIB exam is held biannually, once in June and once in November. CAIIB exam Nov 2022 is approaching soon, and candidates who wish to appear for the CAIIB exam in November 2022 need to start with their preparation. At learning sessions, we have compiled a very concise CAIIB study material for 2022, which includes video courses, free study notes, and free CAIIB mock tests Nov 2022.

Before we talk about the CAIIB study material for 2022, we would like to tell you about the dates of the CAIIB exam Nov 2022 and then discuss a bit about the functions of Central banking.

CAIIB EXAM NOVEMBER DATES

Date  Time  Subjects
27th November 2022 ONLINE – Will be mentioned in the admission Letter Advanced Bank management 
4th December 2022 ONLINE – Will be mentioned in the admission Letter Bank financial management 
10th December 2022 ONLINE – Will be mentioned in the admission Letter Rural Banking, Retail Banking, Human Resource Management, Information Technology, Risk Management, and Central Banking

 

Now that we are done with the dates of the CAIIB exam 2022 to be held in November and December, we would like to move on to the functions of a Central Bank.

Read Also: CAIIB CENTRAL BANKING SCHEDULE OF LIVE CLASSES

FUNCTIONS OF A CENTRAL BANK

An apex financial entity in the banking system is the central bank. It is a crucial element of a country’s economic and financial structure. Controlling, regulating, and stabilising the nation’s monetary and banking system fall under the purview of the central bank, which operates as an independent body.

The Reserve Bank of India is the country’s main financial institution. It was founded in 1935. The preservation of the nation’s economic independence and financial stability is the responsibility of the central banks.

The following list of central bank duties can be discussed:

  1.  A currency supervisor or issuer bank
  2.  The government to the bank
  3.  The owner of the cash reserves
  4. International currency keeper
  5. Last-resort lender
  6. Transfer and settlement clearinghouse
  7. A credit manager
  8. Guarding the interests of depositors

The functions described above will be covered in more detail in the following lines.

Central banks have the sole authority to produce currency in an economy. They are also known as currency regulators or banks of issue. Every global central bank participates in the issuance of currency to the economy. The central bank is also referred to as the bank of issue because this is one of its most crucial roles in an economy.

Before, all banks were permitted to print their currency, which led to an unorganized economy. Governments worldwide gave central banks the authority to issue money to avoid this predicament, which led to uniform currency circulation and a steady cash flow into the economy.

Bank to the government: The central bank’s role as the government’s bank is one of its key responsibilities. The central bank receives deposits and provides the government with money. The government also takes part in sending and receiving funds. For the government to recover from difficult economic times, central banks also provide short-term loans to the government.

In addition to serving as the government’s bank, it also represents and advises the government by offering guidance on economic policy, the money market, and government loans. The central bank also plays a crucial role in formulating monetary and fiscal policies that aid in regulating the market for money and containing inflation.

Custodian of Cash Reserves: It is customary for a nation’s commercial banks to retain a portion of their cash on deposit with the central bank. Commercial banks can withdraw that balance when there is a high need for money and repay it when there is a low need for cash. Because of this, the central bank is known as the banker’s bank. The central bank is crucial to the way that commercial banks create credit.

Maintaining a minimum balance of the foreign currency is one of the central bank’s key duties as the custodian of international money. Maintaining such a balance is necessary to deal with unforeseen or urgent needs for foreign reserves and to address any unfavourable balance of payments deficits.

Lender of last resort: In times of financial difficulty, the central bank is a lender of last resort by lending money to its member banks. It carries out this duty by offering loans secured by securities and treasury bills, as well as by rediscounting bills. This is one of the central bank’s most important roles because it prevents the financial foundation of the economy from crumbling.

Clearing house for transfer and settlement: The central bank serves as the commercial banks’ clearing house and aids in resolving their shared debt. The representatives of various banks gather at a clearing house to settle interbank transactions.

Credit controller: Central banks are also responsible for managing credit in the economy. Commercial banks occasionally produce a large amount of credit in the economy, which raises inflation. The CRR may also be altered by the central bank to control how commercial banks create credit. The central bank regulates the process of credit creation by commercial banks through open market operations and CRR changes.

To protect the interests of depositors, the central bank must also keep a close check on how commercial banks are operating.

After giving you the gist of the functions of the Central Bank, we would like to tell you what all we provide in our study material. 

Read Also: CAIIB CENTRAL BANKING SYLLABUS 2022

CAIIB STUDY MATERIAL NOV 2022

We provide you with all the CAIIB study material for 2022, including video lectures that can be downloaded and free short notes in the form of epdfs which can be accessed from our apps for which the links are given at the end of the article. We also provide you with free CAIIB mock tests to improve your performance for the CAIIB exam Nov 2022.

Hope you found this article useful.

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