Central bank is the supreme monetary institution, which is at the apex of the monetary and banking structure of a country. It is the leader of money market and as such controls, regulates and supervises the activities of commercial banks. It is the central monetary authority, which manages the currency and credit policy of the country and functions as a banker to the government as well as to the commercial banks. It is difficult to define central bank accurately.

However, different definitions have been given emphasizing one or more functions of the central bank. De Kock defined central as “a bank which constitutes the apex of the monetary and banking structure of the country.”

According to Vera Smith, “the primary definition of central bank is a banking system in which a single bank has either a complete or a residuary monopoly of note issue.”

According to the Bank for International Settlements, a central bank is defined as “the bank in any country to which has been entrusted the duty of regulating the volume of currency and credit in that country.”


In the words of Kent, a Central bank is an “institution charged with the responsibility of managing the expansion and contraction of the volume of money in the interest of general public welfare.”