Explain the following functions of Central Bank: Custodian of foreign exchange reserves



Custodian of foreign exchange reserves The Central Bank is the custodian of country’s stock of gold and international currencies. The Central Bank maintains the stability of exchange rate. All earnings in foreign exchange transactions are to be deposited with the Central Bank and are routed through it.
By the sale and purchase of foreign currencies in the market, Central Bank can bring the external value of the currencies at par with their internal values and helps the government to pursue a coordinated policy towards Balance of Payment situation in country.