The Central Bank 2. Co-operative Banks 4. Its moral persuasion is usually very effective so far as commercial banks are concerned. "A Central Bank is the bank in any country to which has been entrusted the duty of . To achieve this, the Central Bank undertakes data collection, statistical analysis, economic analysis and research designed to inform economic policy making domestically and at the euro area level. 3) The RBI was established as a private shareholders bank. Indeed, instability in the general price level undermines the function of money as a store of value Central bank role. And the government's cash management should be consistent with the central bank's overall management of liquidity. 4) RBI's monetary policy has to sub serve the national, economic & social objectives These include printing money, operating monetary policy, the lender of last resort and ensuring the stability of financial system. Credit control: Central Bank takes initiative by using its monetary policy to control the money supply in the economy by imposition of bank rate change, Reserve rate change which effects the Credit expansion capacity. Central banks play a crucial role in ensuring economic and financial stability. The role of Central bank in macroeconomic stabilization. Like any other economic agent, central banks face a resource constraint that limits their actions. Some central banks directly control these polic ies, while others play an advisory role. 3. Controller of Credit and Money Supply: At the MPC meeting,a rate is agreed at and later made use of by all banks.The rate is called the Monetary policy rate (MPR). Central Bank plays the role of banker to the Government and Banker to the Banks in the Country. Part I dis cusses the concept of central ban.king including its origin and rationale. Chandavarkar (1996 cited in Geraats, 2002) claims that macroeconomic stabilization is the pivotal role of the Central Bank. 10. To avoid any of the situations above, central banks ensure that the price level remains stable. Central banks do this operation through the commercial bank. insolvent. To issue and control notes and currency as a central bank. Accepting Houses 6. To foster monetary, credit and exchange conditions The central bank as an institution was setup relatively recently, having emerged in most industrialized countries in the late nineteenth century or the first half of the twentieth century. 11. This is achieved by implementing policies that guard against inflation. for trade& business and socio-economic development. The primary function of the central bank is to control the money supply in the economy. So, for example, for the three major economies included in figure 1, one can easily extractusing the methodology developed in Diebold and Li (2006)on a country-by- Discount Houses 5. So, a modern bank plays a vital role in the socio economic matters of the country. Currency regulator or bank of issue: Central banks possess the exclusive right to manufacture notes in an economy. Central Banks in the Eastern African region seem to face similar challenges - but the important role the CBK is expected to play in the vision 2030 is critical but some challenges are evident . Let's further discuss these functions of Central Bank in details. Its goals are to stabilize the nation's currency, keep unemployment low, and prevent inflation. To maintain economic stability by means of controlling money market. Another key function of Through the conduct of monetary policy, central banks shape the money and credit supply conditions, in a direction that is desirable given the economic conditions. Table 1 from Siklos (2002, Table 1.2) lists the year of origin and the primary motivation for the creation of 21 central banks in what are now referred to as advanced economies (AE). It therefore is crucial that such a potential promotional role of the central bank is covered by the mandate. 1 And yet, the academic literature on central banking has largely ignored this topic thus far. 3. They play a decisive role in the development of the industry and trade. Central banks' tasks in the political and economic system have varied over time and on economic issues. Creating uncertainty and distortions in the economy.

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