Question

Answer the following questions.
As a Government Bank, what are the functions Central Bank Performs.

Answer 1

As a Government bank, the functions performed by the central bank are:

1. Accepting deposits: The central banks accept deposits of the government and open a bank account in the name of the government.

2. Granting credits: The central bank lends money to the government when they are facing a liquidity crunch or any type of insolvency. The central bank is the last resort to provide loans to the government against any type of collateral.

3. Guidance: The central bank keeps guiding the government on all the fiscal and monetary matters in order to run the economy and also helps them to control the situation of inflation or deflation in the economy.

4. Maintain foreign reserve of the government: The central bank maintains foreign reserves of the government which helps the government to do transactions with other countries.