Question
Explain five functions of the central bank of Kenya in the Economy.
Answer
i) Currency issue - CBK issues currency notes and coins. It regulates the supply of money in the economy.
ii) Banker to the government - CBK accepts deposits from the government for safe keeping. It also manages national debt and advises the government on economic and financial matters.
iii) Banker to commercial banks - CBK provides banking services to commercial banks.
iv) Controller of commercial banks - CBK directs and advises commercial banks on their operations.
v) Lender of last resort - CBK lends money to the government and commercial banks in times of crisis.
vi) Credit control - CBK regulates the amount of money in circulation thus limiting the lending capacity of commercial banks and stabilizes the economy.
vii) Custodian of foreign currency reserves - CBK regulates the inflow and outflow of foreign exchange in the economy.
viii) Clearing house - CBK facilitates clearance of interbank indebtedness arising from cheques drawn on each other.
ii) Banker to the government - CBK accepts deposits from the government for safe keeping. It also manages national debt and advises the government on economic and financial matters.
iii) Banker to commercial banks - CBK provides banking services to commercial banks.
iv) Controller of commercial banks - CBK directs and advises commercial banks on their operations.
v) Lender of last resort - CBK lends money to the government and commercial banks in times of crisis.
vi) Credit control - CBK regulates the amount of money in circulation thus limiting the lending capacity of commercial banks and stabilizes the economy.
vii) Custodian of foreign currency reserves - CBK regulates the inflow and outflow of foreign exchange in the economy.
viii) Clearing house - CBK facilitates clearance of interbank indebtedness arising from cheques drawn on each other.
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