Questions

Outline Six Services Offered By the Central Bank to Commercial Bank in a Country

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The Central Bank is the banker for the government, encompassing the national government, government ministries, departments & agencies (MDA’S) and county governments. These institutions hold a variety of accounts with the Central Bank, depending on their needs, which allow them to receive deposits and make payments. The Central Bank monitors these accounts to ensure that the institutions aren’t at risk of overdraft, and also advises the institutions on financial matters.

Banking Services to the Government

The Central Bank is the banker for the government, encompassing the national government, government ministries, parastatals and county governments. These institutions hold a variety of accounts with the Central Bank, depending on their needs, which allow them to receive deposits and make payments. The Central Bank monitors these accounts to ensure that the institutions aren’t at risk of overdraft, and also advises the institutions on financial matters.

Banking Services to Commercial Banks and Microfinance Banks

The Central Bank provides the following services to Commercial Banks:

  1. Maintains accounts to enable commercial banks to effect and receive payments from other commercial banks, the government and other external financial institutions in Kenya shillings and foreign currency.
  2. Provides a Real Time Gross Settlement (RTGS) system to enable commercial banks settle their interbank obligations on a real time basis.
  3. Provides liquidity through the Intra-day Liquidity Facility (ILF) and the Overnight Loan Facility. These loans are secured by government securities.
  4. Hosts the Kenya Bankers Association’s Automated Clearing House (ACH).
  5. Facilitates completion of commercial banks and micro finance banks external audits by providing confirmation of balances in their clearing accounts and cash reserve ratio accounts in our books to their external auditors.
  6. Provision of the Daily Inter bank Money Market Report, this is a summary of daily borrowings among commercial banks in the interbank market and guides the industry in pricing inter bank loans.

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