How to define central bank
Meaning of central bank
Central banking in the main monetary institution which is at the apex of the monetary and banking structure of a country.It is the leader of a money market and such as controls, regulates and supervises the activities of all commercial banks. It is the central monetary authority which manages the currency and credit policy of the country and functions as a banker to the government as well as commercial banks.It is difficult to define central bank accurately.However, different definitions have given emphasizing one or more functions of the central bank.
Definitions of Central Bank
1) Prof. R. P Kent in his book “Money and Banking” has defined Central Bank as “An institution charged with the responsibility of managing the expansion and contraction of the volume of money in the interest of the general public welfare.”
2) According to Prof. W. A. Shaw, “A Central Bank is a bank which controls credit.”
3) Prof. Paul A. Samuelson defines a Central Bank, as a bank of bankers. It’s duty is to control the monetary base and through the control of high powered money, to control the community’s supply of money. ,
4) Prof. Hawtrey defines, “Central Bank is that which is the lender of the last resort.”
Central Bank is the apex or the supreme monetary and banking authority and occupies a pivotal position in the monetary and banking structure of the country. It is the undisputed leader of the money market.
Thus the Central Bank aims at promoting the financial and economic stability of the country. As such, it supervises, controls and regulates the activities of the Commercial banks associated with it and manages the monetary system of the economy. It is charged with the duties and responsibilities of carrying out the monetary policies, formulated by the government and with performing the duties of banker’s bank and fiscal agent for the government.
The main objective of the Central Bank is not to earn profit, but to work for the benefit and welfare of the society as a whole. It aims at achieving this objective by way of carrying out the following functions.
De Kock define central bank as ” a bank which constitutes the apex of the monetary and banking structure of the country.”
According to Versa Smith,” the primary definition of central bank is a banking systems in which a single bank either a complete or residuary monopoly note issue.”
According to the Bank for International Settlements, a central bank is defined as ” the bank in any country to which has been entrusted the duty of regulating the volume of currency and credit in that country.”In the words of Kent, a Central bank is an ” institution charged with the responsibility of managing the expansion and contraction of the volume of money in the interest of general public welfare.”