What are three key functions of a central bank?

Functions of Central Bank

• Issue money.
• Lender of Last Resort to Commercial banks.
• Lender of Last Resort to Government.
• Target low inflation.
• Target growth and unemployment.
• Operate monetary policy/interest rates.
• Unconventional monetary policy.
• Ensure stability of the financial system.

How does central bank control credit in the economy?

The central bank controls credit by making variations in the bank rate. ADVERTISEMENTS: If the need of the economy is to expand credit, the central bank lowers the bank rate. Borrowing from the central bank becomes cheap and easy.

What is the main objective of credit control?

The main objective of this credit-control function is to save economy from inflation and deflation and to stabilize the economy and prices. METHODS OF CREDIT CONTROL Credit control is one of the most important responsibility of a central bank.

How does the Central Bank control credit in the economy?

This activity of the Central Bank will force the Commercial Banks to curtail the creation of credit in the economy. In this way by raising the cash reserve ratio of the Commercial Banks the Central Bank will be able to put an effective check on the inflationary expansion of credit in the economy.

What are the objectives of the Central Bank?

With this function, the central bank regulates the credit granted by the commercial banks to its customers. It aims to achieve economic development with stability as well as to manage the inflationary and deflationary pressure.

What is the importance of credit control in India?

Credit control is an important tool of the monetary policy used by Reserve Bank of India (central bank) to control the demand and supply of money and flow of credit in an economy. RBI keeps control over the credit created by commercial banks. Objectives of Credit Control