Features of the Central Bank Although the central bank is a banking financial institution like other banks, it has some distinctive features that set it apart from other banks.
Significant features of the central bank are discussed below:
1. Unique organization:
There is only one central bank in each country. Because the government does not allow the establishment of more than one central bank in any country. “Features of the Central Bank”
So the central bank as a single institution. In addition, since there is only one central bank in any country of the world, the bank does not have to compete with any other bank and can operate independently.
2. Legal entity:
It is established by special ordinance or law of the central bank government. The central bank is also called an autonomous bank as it is independently regulated by the self-regulatory system.
3. Welfare organization:
Central Bank is a non-profit organization. The purpose of the central bank is to ensure the welfare of the people and to put the country’s economy on a strong footing.
The central bank works for the welfare of the people by controlling the demand and supply of money in the money market and by maintaining the level of credit supply at a reasonable level. 8.
4. Monopoly right of issue note:
At present in almost all the countries the central bank is the sole responsible institution for the issue of currency and notes. The central bank issues banknotes and government.
The central bank also issues banknotes. A significant feature of the central bank is its monopoly on the circulation of notes.
5. Guardian of the money market:
The central bank acts as the organizer and regulator of the money market. The Central Bank provides orders, instructions and advice to the member banks and other financial institutions on the proper development and operation of the currency market.
The central bank also plays a role in stabilizing the money market and the price level by controlling the money market by assessing the amount of money and creditworthiness of the country. In short, the central bank is the sole owner and patron of the money market. “Features of the Central Bank”
6. Banker to the government:
The central bank acts as the banker of the government. The central bank is usually government-owned. Not only that, the bank, as a government bank, maintains government funds, lends to the government, represents the government at home and abroad, and plays a significant role in implementing important monetary policy of the government.
Note that the central bank may be established in the joint ownership of public and private.
7. Banker and controller of other banks:
The central bank directly manages and regulates the banks listed as bankers of other banks through necessary orders, instructions, advice and co-operation in banking matters.
Therefore, in order to form a new bank and open a new branch of an existing bank, permission of the central bank has to be taken. They also have to open an account with the central bank and deposit a certain portion of the deposit compulsorily.
Even carrying out foreign trade requires permission from the central bank. Therefore, the central bank is the banker and regulator of other banks and commercial banks. Which is one of the features of this bank. .
8. Performance of the duty of clearing house:
A clearing house is a system through which banks of a particular region can settle their interbanking debts and financial transactions with each other. The Central Bank plays an important role in facilitating the smooth execution of such interbank transactions between the listed banks for the purpose of coordination through the overall banking system. “Features of the Central Bank”
9. Controller of foreign exchange:
The special method or technique by which the exchange rate of one country’s currency with another country’s currency is determined by determining the exchange rate is called foreign exchange. The central bank of a country determines the exchange rate of the domestic currency and manages and controls the foreign exchange. Therefore, any approved commercial bank or financial institution has to abide by the policies and guidelines formulated by the central bank in the field of foreign exchange. In this case the value of the currency of one’s own country is maintained.
10. Lender of the last resort:
The central bank is considered as the last resort of loans of listed commercial banks. In the liquidity crisis of commercial banks, if it is not possible for them to raise funds from any other source, the central bank assists them through lending.
That is why the Central Bank is the lender of the last resort. In conclusion, the central bank has certain features which only the central bank has the legal right to observe. And these features have given the central bank a separate entity.