Concept of central bank, Managerial Economics

Concept of Central bank

M.H. De Kock concept of central bank is superior to that of others as it is more inclusive. His long definition of central bank includes many of the important functions performed by the central bank. However his definition lacks brevity which is an essential quality of any definition. According to De kock a central bank is a bank which constitutes the apex of the monetary and banking structure of its country and which performs as best as it can in the national economic interest the following function.

1.The regulation of currency in accordance with the requirements of business and the general public, for which purpose it is granted either the sole right of note issue or at least a partial monopoly thereof.

2.The performance of general banking and agency services for the state.

3. The custody of the cash reserves of the commercial banks.

4. The custody and management of the nation reserves of international currency.

5.The granting of accommodation, in the form of rediscounts or collateral advance, to commercial banks, bill brokers and dealers, or other financial institution and the general acceptance of the responsibility of lender of the last resort.

6The settlement of clearance balances between the banks.

7.The control of credit in accordance with the needs of business and with a view to carrying out the broad monetary policy adopted by state.

A further requisite of real central bank is that its should not to any great extent perform such banking transactions as accepting deposits form the general public and accommodating regular commercial customers with discounts or advances. It is now almost generally accepted that a central bank should conduct direct dealings with the public only in such forms and to such extent s in the circumstances of the particulars country. It considers absolutely necessary for the purpose of carrying out its monetary and banking policy.

Posted Date: 12/1/2012 5:40:43 AM | Location : United States

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