Explain "Note Issue" function of central bank.
OR
Explain "Banker to the government" function of central bank.
Explain "Note Issue" function of central bank.
OR
Explain "Banker to the government" function of central bank.
Issuing of Notes or Currency Authority:
The central bank has the sole monopoly to issue currency notes. Currency notes and coins issued by the central bank are the legal tender money. Legal tender money is one which every individual is bound to accept by law in exchange of goods and services. Following are the reasons for giving the monopoly right to the central bank:
(a) It gives uniformity in money distribution.
(b) It enables the government to have supervision and control over the supply of money in the country.
(c) It enables the central bank to exercise the control over the creation of credit by the commercial bank.
OR
As banker to the Government, Central bank performs the following functions:
(a) It receives deposits from the Government and collects cheques and drafts deposited in the Government account.
(b) It makes payments on behalf of the Government to meet its budget deficit.
(c) It also advances short term loans to the Government in exchange of securities.
(d) It provides foreign exchange to the Government.
Issuing of Notes or Currency Authority:
The central bank has the sole monopoly to issue currency notes. Currency notes and coins issued by the central bank are the legal tender money. Legal tender money is one which every individual is bound to accept by law in exchange of goods and services. Following are the reasons for giving the monopoly right to the central bank:
(a) It gives uniformity in money distribution.
(b) It enables the government to have supervision and control over the supply of money in the country.
(c) It enables the central bank to exercise the control over the creation of credit by the commercial bank.
OR
As banker to the Government, Central bank performs the following functions:
(a) It receives deposits from the Government and collects cheques and drafts deposited in the Government account.
(b) It makes payments on behalf of the Government to meet its budget deficit.
(c) It also advances short term loans to the Government in exchange of securities.
(d) It provides foreign exchange to the Government.
