The Kickass Study Guide For Central Banking!

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What are Central banks?

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As students of Banking and Insurance one of the most important pillars of your education in this specialization would be Central Banking. In simple terms you can term a central bank as the ‘baap’ of all banks within a country; so to say it is the bank that controls the economy of the country.

A central bank is the apex bank of the country and is headed by the governor, president or chairman and in India it the governor of the central bank whose signature we find on bank notes.


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Our Central Bank is the Reserve Bank of India and it controls the monetary policy of our country’s economy and our currency which is the Indian Rupee. Although it works hand in hand with the finance ministry it is a distinct entity as compared to the finance ministry. We are well aware of the yearly financial budget released by the finance ministry which is done hand in hand with the RBI, whereby our taxation slabs are determined, the tax charged upon various goods and services fluctuates and our interest rates are determined for a particular financial year; it also takes into accord the inflation rates, foreign reserves, subsides and funds and all of this is determined with mechanisms from the central bank.

One of the primary functions of the central bank on the macroeconomic level is regulating inflation and price stability which like I mentioned above we get a glimpse of in the national budget every year. It controls the flow of currency in the economy so that the levels of inflation and recession can be controlled. Basically it is the regulator and supervisor of the banking system.

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Its second function is to work as a banker’s bank and as a lender of the last resort, on a micro economic level. Commercial banks and scheduled banks are all account holders of the central bank and hence it is termed as the banker’s bank and helps facilitate activities between commercial banks if the need arises.

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Now when clients go to commercial banks to borrow money which we call as loans, the commercial banks provide these on a first come first serve basis, but the commercial banks too have restrictions on the amount of money they can lend, so when they run out of funds they can approach the central bank which is why even though the bank is not dealing with commercial banking procedures on a daily basis it works out as a lender of the last resort for the commercial banks in times of need.

Another very important function of the central bank is as the manager of foreign control and issuing of currency notes. In India the RBI also functions in order to facilitate development and helping in detection and curbing the supply of fake currency notes.

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What is the Syllabus for this subject?

  1. Why Central Banks?
  2. Instruments of Central Banking
  3. RBI and Non-Banking Financial Companies
  4. Financial Sector Reform and the Role of RBI
  5. Credit Creation and Money Supply Determination
  6. Central Banking in Open and Market Oriented Economies
  7. Issues of Financial Stability and Autonomy
  8. Independence of Central Banks

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How can I study this Subject?

This is a complete theory subject and there are a few methods you can follow to get it right. Take up the subject well in advance because it isn’t difficult to understand or remember for the exam, so you can finish it up in time and be confident of scoring well in your paper.

Read through each chapter and underline whatever you feel is important. Once you complete this for one chapter you can take up the question answers and solve them, while you do that you don’t really have to write down answers to each question like a school kid, you can simply take up each question and below it write down in bullet points or in the arrow sequence the key points of your answer.

  • This
  • Is
  • Called
  • As
  • Bullet points

This à is à what à an à arrow à sequenceà looks like.

Once that is done proceed to the next chapter and eventually finish your syllabus this way. Once you are done with this process you can take up past year’s university question papers and solve them, by revising the answers using the points you have created. Solving past years university papers is a must because these papers give you a very good insight into what the university has considered as important all these years and so you know that those are the questions that have the highest probability of turning up in the exams.

Can you make a career with the RBI?

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Yes, you absolutely can make a career with the central bank of India and the best part is in the awe and respect you are going to be commanding as a member of the RBI. The RBI offers a summer placement to students pursing post graduation degree in Management / Economics / Econometrics/ Banking / Finance / Law (five year program).

Also,  you can apply full time in departments like the Monetary Authority, as the Supervisor of the Financial System, the Issuer of Currency, the Manager of Foreign Exchange, a Banker to the Government , in the Payment Systems, in the Bankers’ Bank department or in a Developmental Role and Under the Research wing.

The important part that you must be well aware of is that it won’t take a simple graduation degree to help you get placed in the apex bank of the country, you will need a lot more in terms of post graduation knowledge and work experience in diverse banking fields to help you land a job with the most prestigious bank in the country.

Only the best of the best will get an opportunity to actually run the economy of the entire nation and to be one of them should be a sure dream for anyone who plans to make a career in banking after all b for the best is what will help you reach the top eventually.

All the best! Keep dreaming, keep studying and scoring well 🙂









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