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Questions
Explain the banker's bank function of the Central Bank.
State two ways by which the central bank of the country act as a bankers' bank.
Explain the following function of a central bank:
Banker to the Banks
Explain the following function of this institution:
Bankers Bank
Solution
- As a banker's bank: Under the banking law, commercial banks are required to deposit cash reserves with the Central Bank. It gives loans to commercial banks as a lender of last resort.
- As a supervisor: The central bank supervises, regulates and controls the commercial banks. The regulation may be related to their licencing, branch expansion, amalgamation, etc. It also includes periodic inspection of banks.
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RELATED QUESTIONS
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Reason (R): The Central bank acts as a Clearing house for the transfer and settlement of mutual claims of commercial banks.
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