Two functions of a Central Bank are :
(i) Banker's Bank: The central bank acts as the bank for all commercial banks in the country. When a commercial bank needs funds it can obtain loans and rediscount its bills with the central bank. Commercial banks are required to keep a cash reserve with the central bank so as to control credit in the country. The central bank advises commercial banks on matters relating to their business.
(ii) Lender of the Last Resort : The central bank helps commerical banks in times of emergency. Sometimes, a large number of depositors want to withdraw their deposits from a commercial bank at the same time. Under such circumstances, the commercial bank will have to borrow from other banks. But the other banks, due to some difficulty, may not be able to help the bank in trouble. At this time, the central bank is the lender of the last resort. The central bank helps commercial banks either by granting loans or by buying their securities.