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Questions
“The central bank is a banker’s bank.” Explain.
“The central bank is a banker’s bank.” Comment.
“The central bank is a banker’s bank.” Justify for and against by giving suitable reasons.
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Solution
- The central bank functions as a banker for the country's commercial banks.
- It serves as the lender of last resort, providing funds to commercial banks through loan advances and bill rediscounting.
- Commercial banks are required to keep a cash reserve with the central bank so as to control credit in the country.
- The central bank advises commercial banks on matters relating to their business.
Notes
Students can refer to the provided solutions based on their preferred marks.
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