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What is Central Bank & Concept of Central Bank

From the name Central Bank we can guess what kind of banking institution it is. The central bank usually refers to the principal bank of a country, which is the bank of the government, the bank of other banks, the last resort of lenders, the issuer of notes and currencies and the regulator of loans.

The central bank of a country can be established in government ownership and in public-private joint ownership. The central bank does not carry out general banking activities.

It formulates and manages various regulations and policies for the smooth conduct of banking activities in the country.

The central bank also represents the government and listed banks at home and abroad and acts as the clearing house for the settlement of interbanking transactions.

Concept of Central Bank:

Concept of Central Bank Central Bank is a non-profit banking financial institution oriented towards the welfare of the people.

With the emergence of different types of banks in different parts of the world in the middle of the seventeenth century, there was a need to control the money market. And the realization that the central bank was born as the regulator of the economy.

Central banks have been established in different countries of the world under government ownership, private ownership, public and private joint ownership.

Since its inception, the central bank has been responsible for the circulation of notes and currency, money supply and debt control.

At present the central bank is the guardian, director and regulator of all commercial banks and money markets. The Central Bank is one of the leading banking institutions in the country, established as the driving force of the country’s economy and run under government control.

It is the highest financial institution in the country, promotes notes and currency, preserves the value of currency, stabilizes the value of debt by controlling the flow of debt, acts as a banker of a commercial bank and performs all financial functions on behalf of the government as a government bank.

The central bank also plays an important role in controlling commercial bank lending and regulating foreign exchange. Bangladesh Bank of Bangladesh, Reserve Bank of India of India, Bank of Japan of Japan, Bank of China of China, Bank of Canada of Canada, Bank of England of United Kingdom, Federal Reserve System of United States etc.

In the light of the above discussion, the following features of the central bank are noteworthy:

  • The central bank is a single entity;
  • The central bank of any country is jointly owned by the government, public and private but is regulated by the government;
  • The central bank is a non-profit organization. The main objective of this bank is public welfare;
  • The central bank has the sole right to issue notes and is responsible for maintaining the currency;
  • Central bank guardian of money market and bankers and regulators of other banks;
  • The central bank lends money to the government in times of financial crisis and serves as a last resort for commercial bank lending.