Answer:
In a developing economy like India, the main objective of central banking is to promote economic growth The role of a Central Bank in a developing economy is discussed below: (i) Control and Regulation of Banking System The Central Bank is expected to perform its traditions functions of controlling and directing the banking structure of the country, (ii) Promotional Functions Since the monetary and banking structure in a developing economy is backward, Central Bank helps in the expansion and promotion of the banking structure. (iii) Developmental Functions The main problem of developing economies is economic development. This Central Bank must, therefore, take all those steps which help in the advancement of economic growth. Or Money supply refers to the stock of money in circulation in an economy at a given point of time. Money supply includes currency in the form of paper money and coins held by individual and business firms and net demand deposits held by commercial banks. According to M, money measure, money supply has following components: \[{{M}_{1}}=C+DD+OD\] Here, C is the currency held by public, DD refers to demand deposit of people with commercial bank are OD includes demand deposits with RBI of other institutions and government.
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