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What is Cryptocurrency A new word emerged in our lives two months after the beginning of the recession of 2008 and gradually transformed from a vague expression ("virtual coin") to the vocabulary used to characterize the new economy. On June 9, 2009 the first bitcoin was released by an anonymous person called Satoshi Nakamoto. For different reasons like the sub-prime crisis, Nakamoto, claimed he is a Japanese man in his 30's, said he gave the open protocol in 2007. Today the new coin is called a "Digital Asset" and decentralization is the principal idea behind it: there's no main institution responsible for regulating it. The most familiar and traded form of Blockchain's technology, Bitcoin, who has crossed the $15,000 lines way back and has shows an image of exponential increase in the past few months. The great advantage of blockchain technology is that it doesn't have to keep records for a large central computer or big managing company. With this ...
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What Is The Central Bank?

What Is the Central Bank?

Generally central bank is involved in printing money and its distribution it also has the power to change monetary base of state. Central bank is also the lender at last resort to government and commercial banks during financial crisis. Most of the central banks of world are politically independent and operate on their own terms.

Central banks are protected from insolvency due to their ability to create money and therefore operate with negative equality- European Central Bank published in 2016

 

Purpose

Main purpose of Central bank is to oversee the printing of money and its distribution, design, and valuation. Central banks also hold the power to detain currency which are or were in circulation. This was seen during demonetization, were RBI under guideline of Indian government, banned ₹1000 and  ₹500 currency note as legal tender.




They also serve to reduce unemployment in the nation by observing the macroeconomics by diverting the flow of money toward the demand side to create employment, by controlling devaluation of currency or increasing prices of relative to demand can help to control inflation.

Central bank observes these changes and keeps the regulation intact so that it can be beneficial toward nation, central bank also overseas rate of capital investments in country, more capital growth leads to better infrastructure and efficient and high-quality goods, which helps in economic growth.

Role

Central bank also has the power to control interest rates, based on situation they can tweak interest rate to boost demand or create adequate supply. Another purpose of central bank is to buy or sell government bonds or treasury bills.

Central Bank’s around the globe has power to create infinite money, they do so by buying government and cooperation bonds, to buy these bonds central bank creates money digitally and gives it to government, government in exchange gets money on promise to pay it later with interest.

Central bank also provides guidance regarding fraud risk management framework, these framework helps to counter fraud against commercial bank.

Mission

It’s also main goal of central bank to keep liquidity in market, if certain situation create were market has lost its liquidity, central bank can pour money during these time into the market to bring back the lost liquidity. Central bank under guideline of can carry out merger or demerger of commercial banks to strengthen their assets position.

Mostly central bank has to maintain minimum foreign currency reserves, it is useful during emergency requirement of foreign exchange and to prevent default. Exchange bank along with central bank works on to create sufficient funds and also purchases the future contracts for exchange currency to help maintain minimum reserves.

It also one of important goal of central bank to collect data by conducting surveys, related to policy, credit, currency, and banking. This data is carefully examined by the policymakers which helps them to understand how the given guideline for exchange, credit and other policy are working, or if any changes are needed.

Policy Maker

Commercial banks are mandatory to keep some deposits as cash reserve, with central bank. Percentage of these cash reserves are controlled by central bank themselves, based on these cash reserves central bank provides loan to commercial banks, in situation where commercial bank have extra temporary funds at them which is not needed, they can also deposit that fund with central bank and earn interest on that fund.

Every central bank has a governor who is appointed by country’s President or Prime Minister, governor has a fixed tenure to fulfil, generally it lies between 8 years to 3 years, depending on country. In India RBI governor has a fixed tenure duration on 3 years. Currently Shaktikanta Das is the 25th Governor of Reserve Bank of India.

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