Central bank is a bank of a country that has control over the regulation of currency supplies and the banking industry. The central bank of a country plays a very important role in the stability of the money supply and the currency of the country. The central bank has the responsibility of regulating the banking industry and setting the official interest rates.
In India the central bank is called the Reserve Bank of India which was established on 1 April 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934 and is a member bank of the Asian Clearing Union. The committee of the central bank includes the central board of directors appointed by the government of India. The current governor of the Reserve Bank of India is Mr. Subbarao. RBI plays a major role in the regulation and supervision of the financial system and fixes limitations to banking operations in order to provide cost-effective banking services to the public. For instance, in a recent report it has emphasized on the fact that while giving a home loan, the banks should not tie their loan with their own prime lending rates (PLR) which often results in pro-bank and against consumer interest.