Question

Define a Central Bank.

Hint:

Think of the Central Bank as the "guardian" of the economy's financial system. It doesn't deal with the public directly; its main clients are the government and the commercial banks.

Answer 1

Step 1: Understanding the Concept:
The question asks for a formal definition of a Central Bank, which is the apex financial institution in a country's banking system.

Step 2: Detailed Explanation:
A Central Bank is a country's supreme monetary authority. It is an apex institution that controls, regulates, and supervises the entire monetary and financial system of a country. It is responsible for formulating and implementing the nation's monetary policy and for maintaining financial stability.
Its primary functions typically include: \begin{itemize}[noitemsep] \item Issuing currency (sole right to print notes). \item Acting as a banker, agent, and advisor to the government. \item Acting as the bankers' bank and supervisor of all commercial banks. \item Serving as the lender of last resort to commercial banks. \item Controlling credit and the money supply in the economy. \item Managing the country's foreign exchange reserves. \end{itemize} The Reserve Bank of India (RBI) is the central bank of India.

Step 3: Final Answer:
A Central Bank is the apex financial institution of a country, responsible for regulating the monetary system, issuing currency, and managing the country's financial stability through the implementation of monetary policy.