THE CENTRAL BANK

INTRODUCTION Central bank is the most powerful economic

institution of country. Central bank occupies an important place in

the monetary & banking system of every country.

It is the apex bank of a country’s monetary and financial system.

It was established on April 1,1935 under the RBI Act 1934.

It was nationalized on Jan 1,1949.

DEFINITION OF CENTRAL BANK

According to O.S. Pugh, “a central bank is a national financial institution created to operate, not for profit, but for the public purpose of influencing the economy in desirable directions through monetary means.”

CHARACTERISTICS OF CENTRAL BANK

Apex institution No profit motive Control the economy Use of monetary means

FUNCTIONS OF CENTRAL BANK

Bank of note issue As banker, agent

and advisor to the govt

As an agent As financial advisor Cash reserve ratio

management Custodian of foreign

exchange reserve of nation

Lender of last resort Clearing house

function Controller of credit Collection of data Agricultural credit Maintaining

international relations

Lender of last resort

CREDIT CONTROL

Credit control refers to the regulation of credit by the central bank for achieving the objective of economic growth and development.

In the modern times, the main function of the central bank is to manage and control and monetary system of the country or the policy of credit expansion and credit contraction is called credit control

METHODS OF CREDIT CONTROL

METHODS OF CREDIT CONTROL

QUANTITATIVE OR GENERAL METHODS

BANK RATEOPEN MARKET OPERATIONS

CHANGE IN CRR AND SLR

QUALITATIVE METHODS

MARGIN REQUIREMENTSREGULATION OF CONSUMER CREDITRATIONING OF CREDITDIRECT ACTIONMORAL SUASION