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    Banking Class 12

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    pratikmalu3
    The document discusses the functions and role of a central bank. It explains that a central bank acts as the central monetary authority in a country. It has the sole right to issue currency notes and regulates the entire banking system and monetary policy. The central bank also acts as the banker, advisor and lender of last resort to the government. It implements various quantitative and qualitative credit control measures to regulate money supply in the economy.

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    © All Rights Reserved
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    Banking Class 12

    Uploaded by

    pratikmalu3
    13 views12 pages
    The document discusses the functions and role of a central bank. It explains that a central bank acts as the central monetary authority in a country. It has the sole right to issue currency notes and regulates the entire banking system and monetary policy. The central bank also acts as the banker, advisor and lender of last resort to the government. It implements various quantitative and qualitative credit control measures to regulate money supply in the economy.

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    banking class 12

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    The document discusses the functions and role of a central bank. It explains that a central bank acts as the central monetary authority in a country. It has the sole right to issue currency notes and regulates the entire banking system and monetary policy. The central bank also acts as the banker, advisor and lender of last resort to the government. It implements various quantitative and qualitative credit control measures to regulate money supply in the economy.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    13 views12 pages

    Banking Class 12

    Uploaded by

    pratikmalu3
    The document discusses the functions and role of a central bank. It explains that a central bank acts as the central monetary authority in a country. It has the sole right to issue currency notes and regulates the entire banking system and monetary policy. The central bank also acts as the banker, advisor and lender of last resort to the government. It implements various quantitative and qualitative credit control measures to regulate money supply in the economy.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 12

    classmate

    Date
    Page

    Banking
    Central Bank Meaning -
    -Central Bank is an Apexbody, thal
    contras 6 perates, cegulater &ditects the
    entire banking (monetarg structure ofr
    the countrg
    . India's centra bank is he Reserye
    bank of fndia CRBID,itwar es talihed
    1935 vnder R8T act pse

    Functions of Cental Bank


    Curreny Aohorily arue af CuNYEy
    Bank of lssue -
    Centeal bank is the see auHhority for issug
    of currercy in the counh
    The nates issued by central bank icireuly
    ted as lega tender' eA-mohey.
    The monopcly of issuing no te ofcentra)
    bank ensuces uniformilg facilitaing exchønge
    Bade within he county
    " by having moropoly oe sSye of note
    cenlal bank can restric or eKand money
    uneOnopaly ot note isSUe CeNtoal banh
    can mainkak on stability inthe nterna
    eerherna yalwe of the cureny

    Banker to he qoyernment
    2t2+2 Cental boank as 'ac an agent oake
    mark ban ker & Einancia aduiSor to the gover
    -nment.
    ciassmate

    As a ban ker
    i) nanages
    )As aban ker toacounts ot the gayernment
    lmaltes Qaymenl government ,it accepktps receyk
    ) 1t provides loan o the
    olects chey ves kdraYgovernment
    s &depsis in
    qovernment accounh
    7 Supplies fore ign exchange tor reeying
    external debts
    " As an Agent
    ) t buys l sels securihies on behalr of the
    government
    Tt clecs axes on hehalf of the governma
    i) t represents government in the internah
    - onal financial istitutions
    . As an Advisor
    ) central bank oct as the financi al
    adv isor to the government on matBers
    i) Advises the government
    such 0s manelary policy fiscal measure
    at po licy 4devaluat
    defficiet financg \rade
    -íon of curreny
    Banhers Bunk and Supirv(30r
    )
    a has the same
    The cen tra Bank ban k as
    commercial
    relationshie with public:
    Commercial "has with the genercd \
    clAsSMate
    Date
    Page

    yLender of Last resort


    r (ommnercial bank faäls \o
    irancial re req,uire mens fromohermeet their
    souresi
    approaches centca bank forloans eadn
    ·Central bank orovidets 2 ypes af loans.
    Bit k rediscocn lig blof erchange
    Lcan against securiby
    So thal the anking seclor does not
    Soffer ahy se back maney maret remais
    shatle
    custodian of (ash eserve
    s a custodian centa ban k mcin ins
    cash rServe of comnmercia banks
    Centralisakicn of Cash reserve has Follauig
    adu anbages
    o nspires public Confidlenee in banks
    Rrouides elastiCity ot credit
    Ltaso act as a lender of\ast resort
    ) Clearig House Func'ion
    . All comm ercia bgns
    have Hheir accoune
    with central bank there fore
    can easily se te claims central bant
    ofcom.mercia
    bcn ks by mghing debittcredit
    in their accoun: entries
    Aduoantag es
    ) t heeps he central ban k in formed
    abou the liquidi posihion of ech
    bank
    ) redvces he wlhdl of cash by he
    classMate

    LommercLal bank < enables them to creale


    (redit

    Super visor
    . Cena bank Suger vises (rCglaes Lcon hes
    Comng cial tanks
    The reguldion of bants nay te relaBed to
    icensing brdnch expansion manayemas o
    amalgamalen 4lyvdaicn 4 pericodic insqecthon
    cfty unks 4retuns Fled by hem
    testet
    iv) Cus tod ian af foreign exchaNgofe naton's
    . Central bank is the cus tod an
    reerve sabalize
    foreign eKChange 49oldreguated
    " Thse reserves are 6
    exchang e tate ininternat ional money markel.erchant
    SE here are plwctuations Wthesoreign
    ratecentrd ban k miaimise them by seling
    4Bwgng foreign corrency
    also exercise mamay e loa ing
    Floaing ko ensure
    " t nemaiend
    stabltyin the exchange rateu he

    of credit 4moneg suppy


    Central bah cantrols mneysupp throuyh
    monetar policies siakon
    tcontrals nflationary Ldef lat onary money
    hgg sup yDuring detainflahion
    Lduring de laion it is
    Supply is redu ce d
    clAsSate
    Date
    Pnge

    Credit Contral mnsures


    by centra tank Princile instrU men bs adcted
    a
    mone tary polcy of ceniral bank How dcc
    centra onk conkrol money supoly
    Guanktave measures -
    mean to requlate he overal credit in
    the economy Ahrough conmercial bank
    Qodillatnehensre
    kh general or indirecl mehod

    Bank
    "Rate of
    Rale
    interest atwhich eentral bank lends
    moneg to Commerc ia hanks for a lang pero
    "when cen tral bok wont to expgndd credi
    it reduces the bank
    qolig rateAxA cheap money
    when cenra ank wans o contealcredi
    inceases he toank tae. AKA dear money polie
    . Durig flaion tank abe
    During derlation bank rale wllincrease
    will deorease
    2 Bepo Rate
    . The nate atwhich
    coUntry lends money toconkral tan k of q
    meel heir short çommercial
    erm needs
    ban ks
    Quring infaion Reporahe ncreasgr
    Voring det lat icn reeo rate is decreed
    classmate
    Date

    Page

    3 hevee Repo Rate


    he rate of interest given by RBl
    to the commercial ban k for parking their
    QKLESS funds wih hom.
    De Flation Decrrase
    4 0pen market 0perdtion ar Ono
    Refers to buyig scling of qovernmen
    securiHes y cen tral bonko comerctal bank
    "ag lation Seling of secuiies
    Deflatin Duyiñg of Securikes
    5.Cash ReSere Raio
    "Ie raio of bank depsit that the Commerc ial
    tonk has to keep wih central Ln k
    "Quring inf lai on ’ jrease
    0ekLation ’ Decrease
    6 Staty tony Liquidiy RatioSLR)
    SLR is what the commercial ban k have
    to keep wilh hemselves as a reserve
    0eflatiOn Dearease
    Qvalitaive Measures
    Gys lhis metho reskicls {he flowofcredit
    to pecific areas of eonomic acivihy which
    is othierwise Kiawn as selective cedit ontrol
    or dire method
    ma
    classmate
    Date
    Page

    uirement -
    Itmargin teq
    tis he diEference bctwon he amont ar
    |oan & marhet Naue of securiy oFfered by the
    hor rowers aqainst he laan eA f maryint
    iyeds RST@40 she commercicl unksoc. a
    allgwed to give loan only upto 60
    6O 1. cfof te
    ydue ofsecunks
    -During nk lakion marging Teq uenment incr
    SesA4 his discoUrag es torrowing becase
    qek less
    Qeople get es Credit ogainst hesCUriy
    Quring deflaicn nargin resiremeat will
    dexeuse thnis encourages horrowigo bocase
    oole 9et mare credt again the security
    Ratiening af credit
    Refers too Fixalkon of ctadit guotqs or
    dif Ferent sectorS of he econcomy
    )Moral ressure
    " t refers o writen ot ora aduce, reyees
    ntormal suggesions drpeal to comne rcia
    ytan K toretrict
    Doring, inf\aton ageeal for credit rericic
    Dorin deflaion eKpansaon of creti
    ) Colechion of statickcs -
    RRI colects aNariey of sBatS hical
    mformalton 4publlsh yhe same
    shahstcs relag o curren foreign
    eKchange qositen á 7 ot eco homiCgrowth
    classate
    Data
    Page

    Signi fiçan ce of cen tvalised CR with te centrd


    banl
    ANS) Centralsed cash reserve
    to oFfer Financial help erates k8\
    the omnrcial
    bank during emg gen cies Akt Financial
    kCComodation o hele
    "Centra ised aush reseru s enabíe RBI lo
    eyercis e conro oer the commercial ban
    the cRRBIan increase
    Br decrase he cvedil creaHon caaciy
    Lof Comnercial ban t
    2 what is Selechve credit aanho ?
    a)- refers ho the disorimina lars policy
    of the cen tral hank eabing to selective
    secorsof the e onoy
    sile
    be encouryed \ havieg to
    he
    Qrodocian /Hhis is osiBve aeication
    of selective credit Control tes\rib the
    On the oher hond Cetral Bank
    uailaiy of crdit lo certain R Don
    priorigseclar.
    ex- Vorng forntlakon ava abilyof chedt
    is festiced seeculaliwe
    tegdive aReicalicn of selelive credit oteol
    3 Exelainhow rommercial bank create
    ureatÛn
    mOney or ex plain the procceSsot mony
    by commercial bank by help ot nonerikul erapla
    (redit creaion ís on e of he imporau
    Funchon of conner cal batti is donG te
    commercial banh wih e motrye of
    Caralrg inkeres
    deands on teg facors
    Arno on ef intia Freshprimary defoit
    Lega reserve ratio CREtefSRLR)
    Sheps for Credit Creatian <Att
    <-A maney
    6 LRR -207initial depasi eRositerc
    O As required bamh ees 207tSio,00
    that is720oc
    as cash tlends remaing rest g 80co
    LA Those who borrow vse the
    +26
    aymont & thase hoe receive mohy For akirg
    pu the money
    back in Hhe bant
    Ths proces con\inus ill to'al cash
    reserve tecom e a,ua o initial dersi!
    Round galt ngrve
    Deesi Loan LRR C2or
    Sniki al 2006

    6400 1600
    Rod 6406 s 126 128o

    Lo40q6 \024
    Tolal Sooo0

    Tod noney creakon > Tnit igl deesil x tRR


    Loan lo+al money crestien - Liia dges

    (Money the Mmollipier


    amount of moreg that
    .
    Commercial tcan Ks Qare alle o create in
    the form of degosis withe euer9 Unit of
    oNy that is heetas reserv e.
    Money Malkplier Sdins

    Suns
    VLRRS-J
    20 tihes

    money mulkpliers LRR

    Credit creat ion Initial derosi x


    LRR
    Gooo X SGoOK 5
    cdassmate.
    Date

    Caleolaeintial deqcsit
    LRR
    4606 Mo ney Creaion = Initial L
    deposit

    Thitial depcsi= \600 cr

    Indi degasi YO0ce


    Tolal deos
    Maney Crea ion Taltial depait
    LRR aitial degoc
    Money creal'on

    40. LRR

    Aniial deposit - SoOcr ldl depoi t loooo


    Tobldegoits, nial dersit money Crea ion
    dassmate
    Data

    Money mulliplier
    LRP
    20\imes
    [0-200cr Money creabed s
    Money creation Cniktal depeeid LRR

    money heukon
    200 xlo0

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