To understand what is the functions of central bank, firstly we should know about what central bank is? Every country of the world has its own central bank for resolving all the monetary and credit problems in the country. We can define the central bank as “Central bank is an institution, which is charged with the responsibility of managing the expansion and contraction of the volume in the interest of the general public welfare”.
Banking & Finance
Banking & finance both combine the study of modern banking and finance for business. Banking and Finance is a basic business subjects in which probably acquiring the matters of finance are discussed. Probably business acquired the business finance from the different banks and the study of such financing for business is known as banking & finance in business education. Today in banking & finance there is a enough scope and every year a lot jobs opened for youth.
If we could not deny the importance of money in business, then we can also never deny the importance of credit in business. Since the supply of money is the lifeblood of a borrowing economy, there are two sources which meet the capital requirements of the business. These are the savings of the people and commercial banks. Probably these Commercial Banks take the savings of money and borrowed them to the needy people as well as the businessmen.
Today most businesses run on credit and there are various types of credit used in business world. Probably businesses don’t have enough amounts of cash to meet the day to day needs of business and as well as other business transactions, but through credit, they can meet all these expenses easily. Also general public various types of credit to enhanced their lifestyle. The term “Credit” refers to purchase in which price is not paid in cash, instead a document is given by the purchaser in acknowledgment of his debt. The document is called as “Instruments of Credit”. A credit transaction therefore is a protected exchange. Credit involves confidence in the person’s honesty and integrity. The fundamental elements of credit are time and trust.
Banking plays an important role in the financial life of a business, and the importance of banks can be seen from the fact that they are considered as to be the life-blood of modern economy. Although no wealth is created by Bank, but their essential activities facilitates the process of production, exchange and distribution of wealth. In this way they become the effective partners in the process of economic development and growth. In the words of Stephenson & Britain “Banks are the custodians and distribution of liquid capital, which is the life-blood of our commercial and industrial activities and upon the prudence of their administration depend the economic well-being of the nation”.
There are different types of bank as well as different opinions about the derivation Bank”. Before discussing the types of bank, let’s see what is bank and from where the word bank had derived. Some authors say that bank is derived from the word ‘Banco” which means bench. According to another opinion the work bank is derived from the German word “back” which means joint stock fund and after some time the word back became “’Bank”.
There are number of instruments of monetary policy, which are important for business to understand, but, here it is also important to know what Monetary Policy is? Credit performs the important functions. Being the major part of the total supply of money in a modern economy, the value of money is influenced by the volume of credit. The volume of credit in the country is regulated for the economic stability. This regulation of credit by the central bank is known as “Monetary Policy”. It is also called Credit Control.
There are different types of paper money, which uses commonly now days in all over the world. But before going towards the types of paper money, lets talk about paper money. What is paper money? Generally term “paper money” refers to bank notes issued by the central bank of the country. Bill of exchange and cheque are also considered as paper money. Paper Money is generally accepted in daily transactions as a medium of exchange.
There are number of functions of money that can be seen easily in the business world. But before discussing the functions of money, lets define the money. Money has been defined by different authors in different ways, which is discussed as under:-
The need for money is quite clear to everyone as it has the capacity to fulfill the different needs of people. So the importance of money in the organizations is quite important as it is used as a motivational tool for triggering the Performance of the Employees. Moreover, besides basic needs, there are many diversified needs that can be satisfied through money. The importance of money is to prove and increase the personal identity of people along with the self perceptions. No doubt, today money has great importance in human’s life and in business it is just like a blood running in our bodies.