Question

Which of these is not a function of Central bank?

Options

• Controlling credit

• Credit creation

• Providing Clearing house facility

• Maintenance of Exchange rate

Answer 1

Credit creation

Explanation:

Credit creation is the primary activity of commercial banks, which dynamically extend the money supply by lending out a large amount of their public deposits. In contrast, the central bank is in charge of macro-regulatory operations, which include controlling the credit generated by commercial banks, providing centralised clearing house facilities for inter-bank settlements, and managing foreign reserves to maintain exchange rate stability.