Quick Scoop

The main functions of a central bank for Class 12 are: issue of currency, banker to the government, banker’s bank, lender of last resort, clearing house, and control of credit.

Functions of Central Bank

  • Issue of currency: It has the sole right to issue notes and maintain confidence in the money supply.
    • [1][4]
  • Banker to the government: It keeps government accounts, receives and makes payments, and helps in managing public debt.
    • [3][5]
  • Banker’s bank: It keeps reserves of commercial banks and provides them financial support when needed.
    • [5][3]
  • Lender of last resort: It gives emergency funds to banks in a crisis so they do not fail.
    • [7][1]
  • Clearing house: It settles payments between banks, making cheque and transfer transactions easier.
    • [3][5]
  • Controller of credit: It controls money and credit in the economy using tools like repo rate, CRR, SLR, and open market operations.
    • [8][1][3]

Easy Class 12 Answer

If you want a short exam-style answer, write this: The central bank issues currency, acts as banker to the government and commercial banks, works as lender of last resort, clears interbank payments, and controls credit in the economy.

One-line memory trick

Remember: Issue, Government, Banks, Rescue, Clear, Control.

TL;DR

The central bank mainly manages currency, supports the government and banks, and controls credit to keep the economy stable.