FUNCTIONS OF THE CENTRAL BANK.

  1. Issuance of currency-this is usually in notes and coins,in correct amounts to check on inflation.
  2. Acts as governments banks-ie keeps overnmentsaccounts,mangagesovernment borrowing as well as a financial advisor to the government.
  3. Bankers to commercial banks(banks banker)-
  • Acts as a custodian of the reserves held commercial banks.
  • Supervises the operations of commercial banks.
  • Advises commercial banks on financial matters.
  • Offers a central clearing house-this is where banks settle debts due to each one of them which arise from their daily operations.
  • Statutory management during financial crisis.
  • Licensing operations of commercial banks.
  • Repatriation of excess foreign currency/profits on behalf of commercial banks.
  • Acts as a lender of last resort

4.Controlling commercial banks-central bank controls commercial banks and other financial institutions giving instructions to them on lending procedures and proper banking practices to prevent over-exploitation of clients.

5.Lender of last resort-this means that commercial banks may obtain loans from the central bank to meet their daily financial obligations when need arises.

6.Exchange control(maintaining stability in exchange)-it is responsible for maintaining a suitable exchange rate between the local currency and foreign currencies.ie official agent to  government dealings.

7.Act as link bank to external financial institutions-this facilitates international financial relationships as well as linking financial institutions e.g. the I.M.F with the World Bank.

8.Facilitates clearing of cheques-it facilitates clearing of cheques between different commercial banks through its clearing house.

9.Administering public debt-it is responsible for management and repayment of the debt(internally or externally)when it matures.

10.Implementation of monetary system/policy-this is so as to regulate the economy using several instruments of monetary policy to either expand economic activities or depress them ie. O.M.Os,bankrates,cashratio,margins,deposits,selective credit control and directives.

11.Credit control-the amount of credit given out commercial banks affects the quantity of money in circulation and this at the end determines money supply in an economy.this is so sensitive due to the aspect of  inflation or deflation.


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