Central Bank: Meaning, Functions, and Legal Powers

Meaning and Concept of Central Bank
Central Bank is the apex bank of the nation. The central bank is the independent regulatory and supervisory body of banking and financial institutions that monitors all the bank and financial institutions of the nation, acts as the custodian of foreign currency, formulates monetary policy, checks inflation, money supply, money demand, and does surveillance of the monetary activities of the nation.

Major functions of central bank are as follows:

1. Issue of currency
2. Banker of the government
3. Banker of the bank

•      Cash reserve ratio
•     Central clearance
•      Lender of last resort

4.Control of the credit and money supply

•         Open market operation
•         Cash reserve ratio
•         Bank rate

5. Exchange control
6. Lender of Last resort
7. Custodian of foreign exchange
8. Clearing house function
9. Collection and publication of data

Legal Power of Nepal Rastra Bank

Some of the major functions of Nepal Rastra Bank are as follows:

1.     To issue bank notes and coins
2.     To formulate necessary monetary policies in order to main price stability
3.     To formulate foreign exchange policies
4.     To determine the system of foreign exchange rate
5.     To issue license to bank and financial institutions to carry on banking and financial business
6.     To act as the banker and advisor of the Government of Nepal
7.     To establish better payment and clearing system
8.     To act as the lender of the last resort to the commercial banks and other financial institutions
9.     To manage foreign exchange reserve