Central Bank - Functions and Credit Control
Central Bank is an entity that controls the monetary system of a nation. The objectives of central bank are: to maintain external and internal value of domestic currency in relation to foreign currency, to ensure price stability in the economy, etc.
The various Functions of Central Bank are:-
Issues Currency Notes
Banker to the Government
Banker to the Banks
Lender of the Last Resort
Custodian of Foreign Exchange Reserve
Clearing House Function
Collection and Publication of Data
Controller of Credit and Money Supply and
Promotional and Developmental Functions
Reserve Bank of India (RBI) is the central bank of India. RBI controls credit in the Indian economy through its monetary policy.
Monetary Policy is a policy by which the monetary authority (central bank) of the country controls the supply of money and availability of credit and rate of interest in the economy to achieve economic stability.
The two instruments of monetary policy are quantitative instruments also known as quantitative methods of credit control and qualitative instruments also known as qualitative methods of credit control.
Quantitative Instruments of Credit Control includes Bank Rate, Open Market Operations, Cash Reserve Ratio and Statutory Liquidity Ratio.
Qualitative Instruments of Credit Control includes Margin Requirements of Loan, Credit Rationing, Direct Action and Moral Suasion.