A Central Bank is an apex Institution of a country that control and regulates the Monetary and financial system of the Country.
It controls the entire banking system of a Country. It is sole agency of note issuing and control the supply of money in the economy. It serves as banker to the Government and manages forex (Foreign Exchange) reserves of the country. The Central bank is known as per RBI in India, Bank of England in UK and Federal Reserve System in USA.
There is no standard definition of a central bank. The definition depends on the functions it discharges. However, a common function that the central bank performs all economies of the World is that it controls and manages the flow of credit supply of money in the economy.
Accordingly, Samuelson says, " Every Central bank has one function. It operates to control economy, supply of money and credit."
Function of the Central Bank -
Principal Functions of the Central Bank are as follows :
(1) Bank of Issuing Notes
(2) Banker to the Government
(3) Banker's Bank and Supervisory Role
(4) Lender of the Last Resort
(5) Custodian of Foreign Exchange
(6) Clearing House Function
(7) Control of Credit