Non-Scheduled Banks

The banks which are not registered in the list of central bank under its charter are known as non-scheduled banks. They are not bound to perform banking services according to the policies and instructions of central bank e.g. Bank of Punjab was a non-scheduled bank.

These banks do not fulfill the required qualifications of a scheduled bank as prescribed by the central bank. They also do not enjoy the public confidence. In many countries, many non-scheduled banks are also working.

Scheduled Banks

The word ‘Scheduled’ means a list. The banks which are registered in the list of central bank under its charter are called scheduled banks. They provide banking services according to the policies and instructions of central bank.

In other words scheduled banks are those which by virtue of financial position are included in the schedule of the banks maintained by the central bank. Every scheduled bank has to fulfill certain conditions. It is also known as a member bank.

Economics as an Art

Science is a theoretical aspect whereas Art is a practical aspect. In economics we study consumption, production, public finance etc. which provide practical solutions to our daily economic problems. Study of cause and effect of inflation or deflation falls within the purview of science but framing appropriate and suitable monetary and fiscal policies to control inflation and deflation is an art.

Lionel Robbins used the word science for Economics. He says Economics is a science, which studies human behavior as a relationship between ends and scarce means which have alternative uses. According to Keynes study of fiscal & monetary measures and their application to solve problems of unemployment, depression, and inflation etc for promoting welfare of human being makes economics an Art.

Economics as a Science

Economics, like other social sciences, make little use of laboratory methods in which changes in variables can be explained in controlled conditions. Economics usually have to examine what has already happened in the past in the real world in order to test their theories. If a simple model can explain observed behavior repeatedly, it has some value, for example, law of demand explains cause and effect relationship between price and demand for a good.

Economics is not an exact science because it depends upon economic behavior of a man and behavior of a person is complex and unpredictable. Economics is a social science, which is concerned with proper use and allocation of resources for achievement and maintenance of growth with stability.

Functions of Central Bank

The central bank is the private of all the banking system. The chief functions of a central bank may be described as follows:

1. Issuing Notes: The central bank has the sole responsibility and monopoly of issuing notes within the country. It is the sole currency authority. The central bank is required to keep a certain percentage of gold reserves against issue of notes.

2. Government’s Bank: The central bank acts as a financer of the government. It keeps the government funds in the custody free of interest. It helps the government in designing a fiscal policy for the country so it also plays the role of financial advisor to the government.

3. Banker’s Bank: It acts as the custodian of cash reserve or balances deposited compulsorily by the scheduled banks. Either by law or custom the member banks have to keep certain portion of their deposits with the central bank as reserve.

4. Credit Control: Probably the most important function performed by the central bank is that of controlling the credit operations of commercial banks. Control of credit means the regulation and control of bank advances.

5. Clearing House: It is the “Clearing House” of the banks. Under this function central bank facilitates the settlement of bills and cheques of other banks.

6. Exchange Control: It is the responsibility of the central bank to control foreign exchange and maintain the rate of exchange. It prepares the balance of payment accounts of the country, and helps the government to keep the balance favourable.

7. Custodian of National Reserve: It is the central bank which serves as the custodian of a nation’s reserves of gold and foreign exchange. It is its duty to take appropriate measures to safeguard these reserves.