Question

Explain the ‘bank of note issue’ function of the Central Bank.

Answer 1

The Central Bank of a country has the exclusive right to issue currency notes and coins. All the currency issued by the Central Bank is considered unlimited legal tender. No commercial bank or any other financial institution is allowed to issue currency. Usually, the Central Bank divides its work into two departments, the Banking Department and the Issue Department. The Issue Department is responsible for printing and issuing currency. It issues money according to the demand in the economy, which depends on the level of economic activity. Therefore, the Central Bank is also called the Bank of Issue