A central bank is a financial institution that oversees the commercial banking system of a state or an economic union of nations and manages the monetary policies and regulations.
Understanding the Term
A central bank is a financial institution given privileged control over the creation and distribution of a currency (that is, money and credit) for a nation or a group of nations.
Central banks serve as the bank of governments, have the power to set interest rates, and are responsible for the money supply in a nation. They are also responsible for managing member banking institutions.
By easing or tightening the money supply and availability of credit, central banks are enacting monetary policy.