Q.State the objectives of central bank.

A central bank aims at monetary stability, price stability and exchange-rate stability, at regulating credit and the banking system, at serving as banker and adviser to the government and as banker to the commercial banks, and at promoting economic growth and overall financial stability.

Meaning

A central bank is the supreme monetary institution of a country, which controls, regulates and supervises the monetary and banking system. In India this role is performed by the Reserve Bank of India.

Objectives of the central bank

1. Monetary stability: to keep the supply of money in line with the needs of the economy and avoid excessive expansion or contraction.
2. Price stability: to control inflation and deflation and keep the general price level reasonably stable.
3. Exchange-rate stability: to maintain a stable external value of the currency and manage foreign-exchange reserves.
4. Control of credit: to regulate the volume and direction of credit created by commercial banks through quantitative and qualitative methods.
5. Banker to the government: to manage government accounts, receipts and payments, and public debt, and to advise the government on monetary matters.
6. Banker to banks: to act as the banker, lender of last resort and clearing agent for commercial banks. …