Money And Banking

Step 1: Understanding the Concept:
The evolution of money solved the problems of the Barter system, such as the double coincidence of wants and lack of a common unit of value.
Step 2: Detailed Explanation:
Money performs several functions, categorized as Primary, Secondary, and Contingent. The primary functions are the most fundamental:
1. Medium of Exchange: This is the most essential function. Money acts as an intermediary in transactions. It allows people to sell goods for money and use that money to buy what they need. This separates the acts of buying and selling.
2. Measure of Value (Unit of Account): Money serves as a common denominator for expressing the values of all goods and services. Just as we measure length in meters, we measure economic value in currency units (like Rupees). This facilitates accounting and price comparison.
Step 3: Final Answer:
By acting as a medium of exchange and a measure of value, money eliminates the inefficiencies of barter and allows for modern commerce and complex economic systems.

Step 1: Understanding the Concept:
The Bank Rate is a tool used by the Central Bank (like RBI) to control the money supply and credit in an economy.
Step 2: Detailed Explanation:
1. The Central Bank acts as the "Banker's Bank". It does not deal with the general public (citizens).
2. When Commercial Banks face a shortage of funds, they borrow from the Central Bank.
3. The official interest rate at which the Central Bank lends long-term funds to commercial banks is called the Bank Rate.
4. By changing this rate, the Central Bank can make borrowing cheaper or more expensive for commercial banks, which eventually affects the interest rates for the public.
Step 3: Final Answer:
Bank Rate is the rate charged by the Central Bank on loans to Commercial Banks.

Step 1: Understanding the Concept:
Currency issuance is a sovereign function, usually delegated to a single authority to ensure stability and uniformity in the economy.
Step 2: Detailed Explanation:
1. In India, the Reserve Bank of India (RBI) has the "Monopoly of Note Issue". It is the only bank authorized to print and issue currency notes (except the one-rupee note).
2. Commercial Banks (whether state-owned like SBI or private like HDFC) do not have the legal right to print money. Their role is to accept deposits and create credit.
3. Private Banks are a subset of commercial banks and likewise lack this authority.
Step 3: Final Answer:
Neither Commercial Banks nor Private Banks can issue currency notes; only the Central Bank (RBI) can.