Question

Explain the 'bank of issue' function of the central bank.

Answer 1

Central Bank has the sole authority for issue of currency in the country. In India, RBI has the sole right of issuing paper currency notes (except one rupee notes and coins, which are issued by the Ministry of Finance). The reason for this is that it brings about uniformity in note circulation and gives the Central Bank direct control over the money supply. It promotes efficiency in the financial system.