(i) Banker's Bank : As a bankers to the banks, the central bank holds surplus cash reserves of commercial banks. It also lends money to commercial banks when they are in needs of funds central bank and also provides a large number of routine banking functions to the commercial banks. It also act as a supervisor and regulator of the banking system.
(ii) Lender of last resort: In case the commercial bank, fails to meet its financial requirement from other sources, it can approach to the central bank as a last resort for loans and advances. Central bank helps these banks by discounting approved securities and bills of exchange or providing loans against their securities. By providing temporary financial help, central bank saves the financial structure of the country from collapsing The direct lending to the commercial bank by the central bank is referred to as 'lender of the last resort, function of the central bank.