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CENTRAL BANK:.......................................................................................................................... 3
PRIMARY FUNCTIONS OF CENTRAL BANK: ................................................................................ 3
1. MONOPOLY TO ISSUE CURRENCY: .................................................................................. 3
2. BANKER TO THE STATE: .................................................................................................. 3
3. BANKER’S BANK: ............................................................................................................. 3
4. LENDER OF THE LAST RESORT: ........................................................................................ 4
5. ACT AS A GUARDIAN: ...................................................................................................... 4
6. ACT AS A CLEARING HOUSE: ........................................................................................... 4
7. Changing the monetary base: ......................................................................................... 4
SECONDARY FUNCTIONS OF CENTRAL BANK: ........................................................................... 4
1. DEVELOPMENT OF SPECIALIZED FINANCIAL INSTITUTIONS: .......................................... 5
2. COLLECTION OF STATISTICAL DATA: ............................................................................... 5
3. PROVIDING TECHNICAL FACILITIES TO BANKERS: .......................................................... 5
4. MANAGEMENT OF FOREIGN EXCHANGE: ...................................................................... 5
CENTRAL BANK OF PAKISTAN: ................................................................................................... 5
FUNCTIONS OF CENTRAL BANK
CENTRAL BANK:
The bank of a country that provides its government and the network
of commercial banks with the services of banking and plays its role in implementing the
monetary policy and regulates the money supply in the country. Central bank plays its role in
maintaining the financial sovereignty and economic stability in the country. The central bank
is responsible for various economic functions. Some of them are described below:
3. BANKER’S BANK:
Central bank also acts as a banker to the local banks of the country.
The central bank is responsible for holding the reserve ratios of all the commercial banks
which is also specified by the central bank. Central bank also has the authority to change the
reserve ratio when it feels necessary. This reserve ratio also helps central bank to regulate the
credit control in the country.
5. ACT AS A GUARDIAN:
The central bank of the country has the custody of all the
resources of the country. It regulates and controls the money market of the country. The
central bank has the authority to control the foreign policy in the country. Controlling of credit
money and regulation of monetary policy is the most important function of the central bank.
Credit is used to control the supply of money.
Some of these financial institutions include ZARAI TARAQIATI BANK OF PAKISTAN and SMALL
AND MEDIUM ENTERPRISE BANK. These are called specialized institutions as they serve the
specific sectors of the economy.
(b) the secondary functions including the agency functions like management of public debt,
management of foreign exchange, etc., and other functions like advising the government on
policy matters and maintaining close relationships with international financial institutions.
The non-traditional or promotional functions, performed by the State Bank include
development of financial framework, institutionalisation of savings and investment, provision
of training facilities to bankers, and provision of credit to priority sectors. The State Bank also
has been playing an active part in the process of islamization of the banking system.
The role of State bank of Pakistan in the development process has been in the form of
rehabilitation of banking system in Pakistan, development of new financial institutions and
debt instruments in order to promote financial intermediation, establishment of
Development Financial Institutions (DFIs), managing the use of credit according to selected
development priorities, providing subsidised credit, and development of the capital market.