Explain the "bankers' bank" function of the Central Bank. - Vidyadip

Question

Explain the "bankers' bank" function of the Central Bank.

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Answer

The Central Bank acts as a banker and supervisor to commercial banks in various ways. Some of them are:

It provides financial assistance to banks by discounting their bills and through loans and advances against approved securities as a lender of last resort.
The commercial banks are required to maintain a certain percentage of deposits with the Central Bank. The sole aim of these reserves is to enable the Central Bank to provide financial assistance in times of financial emergency.
It supervises, regulates and controls the activities of commercial banks.
It provides the commercial banks with centralized clearing and remittance facility.

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