What is a Central Bank?

The central bank in general is an agency that has responsibility for monetary policy in a country’s territory. The central bank has a role to maintain price stability or the value of the currency prevailing in the country, which is known as inflation. The central bank keeps the inflation rate under control and always at the lowest possible value or in the optimal position for the economy, by controlling the balance of goods and money . If the amount of money in circulation is too much, the central bank has the right to use its authority. In Indonesia, the function of the central bank is carried out by Bank Indonesia.

The Duties of the Central Bank (Bank Indonesia)

  1. Making and Implementing Monetary Policy . Implemented to control the amount of money circulating in the community so that the prices of goods and services in the community are controlled.
  2. Regulate and Maintain Smooth Payment Systems . The regulated payment system is a cash and non-cash payment system. The central bank is responsible for creating rules, agreements, standards and procedures used in the circulation of money in society.
  3. Regulate and supervise banking . Supervision is carried out macroprudential supervision, which is a policy made to limit the risks and costs of systemic crises so that the balance of the financial system is maintained.

Central Bank Authority (Bank Indonesia)

  1. Authority to Make Monetary Policy
    1. Determine and determine the discount rate, minimum reserves of commercial banks, financing or credit. As well as monetary targets by calculating the inflation rate in Indonesia.
    2. Controlling monetary open market operations on the money market.
  2. Authority to Manage Payment Systems
    1. Determine and determine the use of payment instruments.
    2. Supervise payment system service providers.
    3. Make and give permission for the operation of the payment system.
  3. The Authority to Manage and Supervise Banking
    1. Make and set banking regulations in Indonesia.
    2. Give sanctions to banks that violate established rules. In accordance with statutory regulations.
    3. Give and revoke licenses on institutions and business activities of a bank.
    4. Oversee banks as banking systems.

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