Saturday, August 22, 2009

Importance of Central Bank

Basically the central bank of govt. therefore it improves exchange control which leads to efficient allocation of foreign exchange. When foreign exchange is opimally allocated, all such will have a positive effect on agri and industrial outputs. Thus output and employment will increase. Consequently, central bank will be helpful in taking the economy on the path of economic development. It is the central bank which controls and regulates the foreign exchange and foreign exchange rates, if central bank realises that the country’s balance of payment is deficit it can suggest to the govt to devalue the currency. Because of the devaluation the exports of the country will be cheaper while imports expensive. In this way, export surplus could be used for economic development.
Central bank gives suggestions and opinions to govt. regarding different economic issues. It issues reports regarding sectors of economy. It keeps the deposits of govt’s foreign exchange and gold reserves of countries. It makes the training of banking personnels, acquaints them with modern trends of banking, it arranges for seminars, refresher courses and work shops. Such all may be accorded as investment in man which will contribute to the economic growth.

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