Meaning of Central Bank. The Central Bank is the apex institution of monetary system of a country. It is banker to the other banks and to government, it issues notes, controls money supply and credit, and maintains monetary stability.
Central Banks have been established in all financially developed countries. They are known by different names in different countries. In India the Central Bank is known as Reserve Bank of India which was established in 1935 as a shareholder bank and nationalised on first January, 1949. In U.K. it is called Bank of England and in Russia it is known as Gosbank.
Necessity of Central Bank. Since the first world war, the most important development in the field of monetary system is the emergence of Central Banks with added prestige and power. Now-a-days the institution of Central Bank is considered indispensable in every country. Now there is hardly a civilised country which does not possess a Central Bank. Central Banks are necessary because of the following reasons.
(i)    Monetary System requires Management. “Money will not manage itself,” said Begehot long ago. Even gold standard was not fully automatic. The paper standard which is in operation in every country now, has to be directed by some central authority.
(ii)    Banking System requires Control and Regulation. The banks of a country, being private institutions, act by profit motive. Because they are competitive concerns, they cannot follow a common policy according to national requirements. The result is either creation of too much credit sometimes or too little at other times. Therefore, a central coordinating authority, which will compel them to follow the appropriate policy under economic situation is necessary. Hence an institution is established which is called Central Bank.