Central bank functions-bank of issue , Managerial Economics

Bank of Issue

The central bank enjoys the monopoly of bank note issue i.e. no bank other than the central bank is authorised by law to print currency notes. Printing of paper currency is one of the most important functions of a modern central bank. The privilege of note issue was almost everywhere associated with the origin and development of central banks .in fact until the beginning of the twentieth century the were generally known as banks of issue. So much important is this function that in the opinion of Vera Smith it is the essence of central bank definition. The following are the main reasons for granting the exclusive monopoly of note issue to central bank.

1. As the use of deposit money created by the commercial banks increased and with this as the growing need for credit central by a central bank was felt, it was realised that a monopoly of note issue allowed to the central bank made over the excessive credit expansion by the commercial banks more effective.

2. The inherence of the right of note issue in one single bank particularly when the payment of notes is guaranteed by the government, imparts the notes a distinctive prestige which is absent in the notes issued by several commercial banks.

3. When the notes are issued by the central bank, they carry with them the advantage of uniformity. Although uniformity can also be achieved by means of direct state issue of notes, many examples of depreciation of government notes in the past by shaking the public confidence have caused the state to vest the right of note issue in the central bank.

4. If the right of note issue is exclusively granted to the central bank it is easier for the state to supervise and control the irregularities and malpractices committed by central bank is issuing notes.

5. Since the central bank handles the complicated matters relating to monetary managements. It is better equipped to solve effectively the problems related to the issuing of notes.

Posted Date: 12/1/2012 6:40:41 AM | Location : United States







Related Discussions:- Central bank functions-bank of issue , Assignment Help, Ask Question on Central bank functions-bank of issue , Get Answer, Expert's Help, Central bank functions-bank of issue Discussions

Write discussion on Central bank functions-bank of issue
Your posts are moderated
Related Questions
A. Write a detailed essay on the importance of economics to managers. OR  What is the role of managerial economics in organizations ? B. What are the methods of measuring nation

types of capital budgeting

Borrowing Facilities If a country's currency is not convertible, it can borrow from countries whose currencies are convertible and use the convertible currencies to make its i

Why do the managers in marris model maximise their satisfaction by choosing a higher growth rate and a lower valuation ratio when compared to the profit maximisation

Plot the demand schedule and draw the demand curve for the data given for Marijuana in the case.

TYPES OF UNEMPLOYMENT   A  person  can  be  either  in the labour force  or  not  in  the  labour  force  of  an economy. The person not  included  in  the  labour force includ

KEYNESIAN VIEW ON UNEMPLOYMENT   Keynes  in his General Theory presented  a view  that  fluctuations in  aggregate demand (AD) influences the equilibrium level of output. Thus

Neoclassical Theory The neoclassical theory of economic growth began its career in the fifties and since the mid fifties a sizeable literature has developed. The theory largely

Q. Explain about Managerial Economies? Large scale production makes possible the division of managerial functions. So there exists a production manager, a finance manager, asal