Central bank is the financial nerve centre of a country. They are also
called government’s bank. Maldives
Monetary Authority is the Maldivian central bank. They are
exercising the general control of the monetary and banking system of the
country on behalf of the government. They are taking a leading role in
the formulation of monetary policy
(Policy which deals with the deliberate manipulation of supply of money
and rate of interest).
The
important functions of central banks are
1)
The government’s bank – They are
the administrators of the government’s bank account. In this public
accounts there are two accounts, they are
a)
Exchequer Account [all taxation
receipts and all current expenditure are entered].
b)
National Loans Fund. [A capital
account for government’s borrowing and lending].
2)
The notes issue- The government
reserves the right to issue notes and coins. (Maldivian currencies are printed
at De La Ru, UK and coins are minted at Royal Mint, UK.)
3)
The National debt – Government
need to spend more money than it can raise through taxation, so they borrow.
The total borrowing is the National debt. Central bank looks after this debt by
a) issuing new securities [Treasury bills and
gilt edged securities] b) Keep register of stock holder. c) Pay
the interest to the stock holders. d) Redeem (pay cash) securities
as they mature.
4) Lender of the last resort – discount houses and other
financial institutions need to borrow money. Central bank provides money they
require against the security of treasury bills or other suitable bills of
exchange.
5) External functions – On behalf of government, central bank handle the
following accounts. a) Exchange equalization account – gold and foreign
exchange reserves are held in this account. b) International monetary
fund – the complex international monetary negotiation in connection with the
supervision of foreign exchange rates.
6) The banker’s Bank – Central banks provides an essential link between the
government and the other banks. All the banks run their account with
central bank. Central bank settles the debts which arise between the
banks as a result of the daily clearing of cheques.
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