Please telll case study on central bank (rbi) for project ?urgent need
Dear Student,
You can prepare a project on central bank as :
A Central Bank(RBI in India) is an integral part of the financial and economic system. They are usually owned by the government and given certain functions to fulfill. These include printing money, operating monetary policy, lender of last resort and ensuring the stability of financial system.
Functions of Central bank
Sanjana
You can prepare a project on central bank as :
A Central Bank(RBI in India) is an integral part of the financial and economic system. They are usually owned by the government and given certain functions to fulfill. These include printing money, operating monetary policy, lender of last resort and ensuring the stability of financial system.
Functions of Central bank
- Issue money. The Central Bank will have responsibility for issuing notes and coins and ensure people have faith in notes which are printed, e.g. protect against forgery. Printing money is also an important responsibility because printing too much can cause inflation.
- Lender of Last Resort to Commercial banks. If banks get into liquidity shortages then the Central Bank is able to lend the commercial bank sufficient funds to avoid the bank running short. This is a very important function as it helps maintain confidence in the banking system. If a bank ran out of money, people would lose confidence and want to withdraw their money from the bank.
- Target low inflation. Many governments give the Central Bank a target for inflation. Low inflation helps to create greater economic stability and preserves the value of money and savings.
- Target growth and unemployment. As well as low inflation a Central Bank will consider other macroeconomic objectives such as economic growth and unemployment. For example, in a period of temporary cost push inflation , the Central Bank may accept a higher rate of inflation because it doesn’t want to push the economy into a recession.
- Operate monetary policy/interest rates. The Central Bank set interest rates to target low inflation and maintain economic growth. To make a judgement on inflationary pressures they will examine every aspect of the economic situation and look at a variety of economic statistics to get a picture of the whole economy.
- Unconventional monetary policy. The Central Bank may also need to use other monetary instruments to achieve macroeconomic targets. For example, in a liquidity trap, lower interest rates may be insufficient to boost spending and economic growth. In this situation, the Central Bank may resort to more unconventional monetary policies such as quantitative easing. This involves creating money and using this money to buy bonds; the aim of quantitative easing is to reduce interest rates and boost bank lending
- Ensure stability of financial system. For example, regulate bank lending and financial derivatives.
- Debt Management: Debt management is one of the important functions of the central bank in an underdeveloped country.
- Credit Control: Central Bank aims at controlling credit in order to influence the patterns of investment and production in a developing economy. Its main objective is to control inflationary pressures arising in the process of development. This requires the use of both quantitative and qualitative methods of credit control.
- Solving the Balance of Payments Problem: The central bank aims at preventing and solving the balance of payments problem in a developing economy.
Sanjana