Definitions of central bank

According to Prof R P Kent, in his book “Money and Banking” has defined central bank as, “An institution charged with the responsibility of managing the expansion and contraction of the volume of money in the interest of the general public welfare”.

According to Prof Paul A Samuelsson, “a central bank is a bank of bankers. Its duty is to control the monetary base and through the control of high powered money, to control the community’s supply of money”

According to Prof  M H De Kock, “ central bank is one which constitutes the apex of the monetary and banking structure of the country. It performs as best as it can in the national interest,, certain functions such as issue, banker to the government, banker to the banks, and custodian of the countrys foreign exchange reserves ‘”.

According to Prof W A Shaw, “a central bank is a bank which controls credit”.

According to Prof Hawtrey, “a central bank is a bank which the lender of the last resort”.
Central Bank is the apex or the supreme monetary and banking authority and occupies a pivotal position in the monetary and banking structure of the country. It is the undisputed leader of the money market.

Thus the Central Bank aims at promoting the financial and economic stability of the country. As such, it supervises controls and regulates the activities of the Commercial banks associated with it and manages the monetary system of the economy.

It is charged with the duties and responsibilities of carrying out the monetary policies, formulated by the government and with performing the duties of banker’s bank and fiscal agent for the government.

The main objective of the Central Bank is not to earn profit, but to work for the benefit and welfare of the society as a whole. It aims at achieving this objective by way of carrying out the following functions.

Posted in General Economics