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Understanding Assets and Liabilities of Central Bank

Sample Balance Sheet of Central Bank - Teachoo.JPG

Different Liabilities of Central Bank

Deposits from Bank

Surplus funds with banks are deposited with Central Bank

So it is a liability for Central Bank

 

Currency and Coins held by Public

Currency Notes are issued by Central Bank

These are promises to bearer to the value equal to amt mentioned in note

So it is also liability

 

Vault Cash held with commercial banks

Cash held by different banks in locker is called Vault Cash

These are also liability for Central Bank as they have been issued by Central Bank

 

Diferent Assets OF Central Bank

 

Govt Securities

Government securities are like a loan to Governemnt

When Govt wants to print a currency, it gives securities to the Central Bank (called Govt Security)

against which Central Bank issues currency

So this Govt security is lika e loan by Central Bank to govt

 

 

Gold and Foreign Exchange

Central Bank purchases Gold and Foreign exchange from market against which it issues currency

 

 

Loan to Banks

Central Bank lends money to various commercial banks for which it earns interest

Since,it is loan given.it is an asset

 

What is High Powered Money or Monetary Base

The total liability of Central Bank is called high monetary money or monetary base

It includes following

Currency Notes in Circulation with Public

Vault Cash with Banks

Deposits held by Different banks with Central Bank

Deposits held by Government with Central Bank

What is High Powered Money or Monetary Base - Teachoo.JPG

 

NCERT Questions

No questions in this part

Other Books

Question 1

In the following questions, select the correct answers:

Which of the following will not be a liability of the central bank?

a. Deposits from Bank

b. Loans to Banks

c. Currency and Coins held by Public

d. Vault Cash held with commercial banks

View Answer

Oswaal Questions

Question 1

Which of the following is not the function of the central bank?

a. Banking facilities to government

b. Banking facilities to public

c. Lending to government

d. Lending to commercial banks

View Answer

Question 2

High Powered money consists of:

a. Curreny and coins held by public

b. Currency, cash reserves with banks and demand deposits

c. Currency held by public and cash reserves with banks

d. Currency and demand deposits

View Answer

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Transcript

Sample Balance Sheet of Central Bank Cash with Public Cash with Bank Locker Bank deposit amt with RBI Govt deposit amt with RBI Gold purchased from Market Forex Purchased from Market Govt Bonds (Loan Given to Govt) Amt invested in Government Bonks Liabilities of Central Bank are called High Powered Money Currency Held by Public Vault Cash held by Commercial Banks Deposits of Commercial bank with Central Bank Treasury Deposits of Govt of India What is High Powered Money or Monetary Base The total liability of Central Bank is called high Powered money or monetary base It includes following Currency Notes in Circulation with Public Vault Cash with Banks Deposits held by Different banks with Central Bank Deposits held by Government with Central Bank Difference between Money and High Powered Money It includes CU +DD (Currency +Demand Deposits of Public) It includes Currency Notes +Deposits of banks Deposits of Govt (It doesn’t include demand deposits of Public) Money High Powered Money

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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 12 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.