QS Study

“Central Bank is the Banker of Other Banks”

Before discussing “central bank is the banker of other banks” we have to know what is a banker. Generally who does banking activities is a banker. Which people have engaged in banking activities are the banker. Central hank does all the activities of the banker of commercial banks.

Central bank does the following activities as the banker of other banks-

  • Central bank deposits certain amount of money on the own bank of commercial banks.
  • Its sanctions sufficient loans at a minimum rate of interest to commercial banks at the time of crisis.
  • This bank provides a fund to the commercial bank at the time of necessary.
  • It arranges clearing house to clear inter-banking activities.
  • It rediscounts the hills of the central bank.
  • This audits the account of commercial banks.
  • It gives advice and provides information to commercial banks.
  • It directs all the activities of commercial banks
  • It works as the agent of commercial banks.

From the above all discussion we can conclude that central bank work as the banker of the other bank as similar that commercial banks work as the banker of the depositors.

Related Study: