What Are The Functions Of Central Banks?

Central banks play an important role in regulating the economy. They serve as regulator in determining the flow of funds and management of financial and non-financial institutions. Central bank is responsible for formulating policies such as monetary policies for determining the interest rates, open market operations for managing liquidity in the market, determining the CRR (cash reserve ratio) to avoid default risks for the banks. Central banks do lending in the extreme times as well for example, it will help the banks in raising funds by initiating policies or lending the money at discount rate. They also help to formulate policies which directly affect inflation and unemployment in the country. They manage the foreign exchange reserves and control almost all the functions related to the economy.