INTRODUCTION:

Central bank is established to control & regulate the monetary & credit
system in the country.

Central bank is the monetary authority of the country having powers to

design, execute, and control monetary policy .In India Central bank is
known as Reserve Bank of India .It was established in 1935 under the
R.B.I Act 1934 and was nationalized on 1st January 1949.

According to Samuelson,A Central Bank is a bank of bankers Its

duty is to control the communitys supply of money. A Central Bank
is a bank which controls credit

A central bank, reserve bank, or monetary authority is a banking

institution granted the exclusive privilege to lend a government its
currency. However, a central bank is distinguished from a normal
commercial bank because it has a monopoly on creating the currency of
that nation, which is loaned to the government in the form of legal
tender. It is a bank that can lend money to other banks in times of need.
Its primary function is to provide the nation's money supply, but more
active duties include controlling subsidized-loan interest rates, and
acting as a lender of last resort to the banking sector during times of
financial crisis (private banks often being integral to the national
financial system). It may also have supervisory powers, to ensure that
banks and other financial institutions do not behave recklessly or
fraudulently.

Most richer countries today have an "independent" central bank, that is,
one which operates under rules designed to prevent political
interference. Examples include the European Central Bank (ECB) and
the Federal Reserve System in the United States. Some central banks are
publicly owned, and others are privately owned. For example, the United
States Federal Reserve is a quasi-public corporation.
Activities and responsibilities:
Functions of a central bank (not all functions are carried out by all
banks):

implementing monetary policy

determining Interest rates
controlling the nation's entire money supply
the Government's banker and the bankers' bank ("lender of last
resort")
managing the country's foreign exchange and gold reserves and
the Government's stock register
regulating and supervising the banking industry
setting the official interest rate used to manage both inflation
and the country's exchange rate and ensuring that this rate
takes effect via a variety of policy mechanisms