The role of the central bank and subsequent developments

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The Central Bank of the country regulates the various financial activities. It has been established as an autonomous body under the Corporate Act, which came into effect decades ago. It was nationalized soon after certain developments in the monetary sector. Its function can broadly be divided into three categories. They are,
• Central banking functions
• Supervisory functions
• Promotional activities

The central bank’s functions include issue of bank notes and functioning as a banker to the government. A Banker’s bank, it is the custodian of foreign exchange reserves and other funds. Its supervisory functions include exercising the power related to
• Licensing
• Branch expansion management
• Amalgamation and liquidation of commercial and cooperative banks

Its promotional function is to set up and develop specialized financial institutions to meet the specific financial requirements of the economy. Since the liberalization of the economy, the lead bank’s activities have undergone major changes. It now offers enough help to emerging players in the financial market. Firms like LoanMax of rod aycox fame has benefited much from the liberalized attitude of the lead bank.

Experts caution that if the lead bank was given more powers and added teeth to reign in the different operators, the negative developments in the financial market that resulted in the present financial crisis would have been prevented. Before the present crisis broke out, the financing institutions did not care much about the loans and the funds under their control. Even when the bad loans were accumulating, fresh loans were given to people that never had the ability to repay. The American financial economy may take some time to come out of the present recession.