The central
bank is the organ of the government that performs major financial operations of
the government and controls and monitors the commercial banks and maintain
stability of money standard.
Functions of
central bank/Bangladesh Bank
A)General function
1. Issue
notes and coins: CB only has the right to issue notes and coins.
2.
Government bank: CB acts as a banker and economic advisor of the
government. It maintains all the accounts of the government
3.
Bankers bank: Central bank acts as a bankers bank. As a rule all scheduled
commercial banks have to maintain SLR 19% with Bangladesh Bank.
4. Lender
of the last resort: At the time of financial crisis, central bank sanctions
loan to the commercial bank. So, it is considered as the lender of the last
resort
5.
Clearing house: Central bank act as a clearing house for settlement of
interbank receipts and payments.
6. Credit
control: CB controls credit by bank rate policy, increase/decrease reserve
ratio, open market operation etc.
B)Purposeful functions
1.Control
currency market: CB acts as a guardian of the currency market by
controlling and maintaining the overall development of currency market
2.
Stabilize exchange rate: By controlling credit CB maintains stability of
foreign exchange rate
3.
Maintain gold standard: CB maintains the control of gold reserve
4.
Stabilize price level: CB stabilizes price level with a view to tackle
inflation or recession
C)Expansion & development functions
1.Development
of agricultural sector: CB formulates policy to expand the agricultural
sector
2.
Development of industrial sector: CB formulates policy to develop the
industrial sector
