DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : P. Samba Murthy,
Designation : Head of Department

Branch :D.C.C.P.
Institute : S.R.R.S. Govt. Polytechnic, Sircilla
Year/Semester : V Semester
Subject : Banking – I
Subject Code : CCP- 504(B)
Topic : Indian Banking Industry – Growth
Duration :50 Minutes
Sub-Topic : Need for Central Bank
Teaching Aids : PPT
CCP504B.12 1
Objectives
On completion of this period, you would be able to
understand:

 The Nature of central bank

 The Activities of a central bank

CCP504B.12 2
RECAP

 Central bank- Apex bank in any country controls

and regulates banking industry
 Banker to government.
 Issues currency notes.

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RECAP

 Central bank does not take up normal banking

works.
 It will not accept deposits, loans, cheques etc.
from the public
 In continuation of the topic on central bank, today
let us know in detail about nature of central bank
and other activities.

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CENTRAL BANK

 This will not entertain the transaction like

issuing housing loan ,accepting fixed deposits,
issue of drafts, cheques etc…, this type of
banks we do not find generally around us.

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Nature of Central Bank

 Important organ of the government.

 Support the economic policy of the government through
Monetary and credit polices.

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Nature of Central Bank (contd..)

 Under control of central government.

 Acts as autonomous body.
 Parliament has no control.

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Central bank

 It has given special powers to control and regulate

working of commercial banks.
 Power to issue license for new banks and grant
permission for starting new branches
 Power to determine the credit policy to be followed
by banks
 Power to inspection.

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Central bank

 Power to issue directions.

 Power to control management.
 Power to advise banks etc.

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Central bank Activities

 Leader of money market.

 Influences monetary and credit conditions and financial
developments in the country.
 Service-oriented financial institution but does not aim at
maximizing profits.
 Lender of the last resort
 Highest monetary authority in the country.
 Actions closely coordinated with department of
Finance, Government of India
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Central bank Activities

 It supervises operations of commercial banks.

Powers to control activities on other banks
activities

 It will serve as a banker’s bank

 Agent and financial adviser to state govt.

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Central bank Activities

 Custodians of government funds, manage public

debts.
 It purchases and sells foreign exchange at fixed
rates by maintaining stable exchange rates.
 Deals with forex (foreign currency exchange)
rates.
 Maintains forex reserves.

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SUMMARY
 It is an important central government financial
organization but acts independently.
 Frames credit and monetary policies.
 supports economic policies.
 Lender of the last resort.

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Frequently asked questions

1. Explain the nature of central bank

2. What are other activities of central Bank. Evaluate
critically.

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Quiz

1. Central bank is a
a) Foreign bank
b) Commercial bank
c) Co-operative bank
d) None of the above

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Quiz

1. Central Bank is run and managed by

a) Political Party
b) Bar Association
c) Central Government
d) None the above

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Quiz

 Central Bank is run with

a) Profit motto
b) Service motto
c) Selfish motto
d) None of above

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Assignment
1. Explain the nature of central bank

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