The Authority of the Central Bank in Indonesia and Their Duties
Rancakmedia.com – The authority of the Central Bank (Bank Indonesia) to calculate discount rates, minimum reserves required by commercial banks, and all forms of credit or other financing.
In addition, the inflation rate in Indonesia is used to achieve monetary targets. Monetary control over open market operations in the money market.
What is meant by a central bank is an institution finance responsible for monetary policy and raising the level of economic activity
Basically, the definition of a central bank is an agency or financial institution that is in charge of monetary policy and produces a stable level of economic activity in a country.
The stability of a country's currency, banking sector, inflation rate, and a country's financial system as a whole is the responsibility of the central bank, which is a private institution of the state government. Bank Indonesia acts as Indonesia's central bank.
Citing several sources, Central Bank, or Bank Indonesia, is tasked with formulating and implementing Monetary Policy, which aims to limit the amount of money in circulation and, therefore, the prices of goods and services within the country.
Then regulate and maintain the smooth running of the payment system, because the regulated payment system is a cash and non-cash payment system.
The rules, agreements, standards and methods used to circulate money in society are the responsibility of the central bank.
And regulate and supervise banks, because the supervision carried out is macroprudential supervision, meaning policies implemented to reduce the risks and costs of systemic crises so that the balance of the financial system is maintained.
Central Bank Authority
Below we have summarized, there are 3 powers of the central bank, namely:
1. Authority to Make Monetary Policy
The central bank has the authority to determine and determine the discount rate, minimum reserve amount for commercial banks, and financing or credit policies.
In addition, the central bank is also authorized to set and determine monetary targets by evaluating the inflation rate that occurs each year.
The central bank as a monetary policy maker is also authorized to control the monetary system without being limited by open market activities in the money market.
2. Authority to Regulate Payment System
The central bank regulates the payment system through 3 ways, namely:
- Determine and determine the use of means of payment
- Create and grant permits for the operation of the payment system
- Supervise the operation of the payment system
3. Authority to Regulate and Supervise Banking
The central bank in regulating and supervising banking has 4 authorities, as follows:
- Make and establish policies related to the implementation of the applicable banking
- Give sanctions to parties who violate policies in accordance with laws and regulations
- Granting and revoking institutional permits and bank business activities
- Supervise the activities of conventional banks in the banking system or individually
Purpose of the Central Bank
The central bank is the entity in charge of monetary policy in a country. The definition of a central bank according to the Big Indonesian Dictionary (KBBI) is a bank whose main task is to assist the government in regulating, maintaining and maintaining the stability of the value of the country's currency.
Duties of the Central Bank
Summarized from economics and accounting books: sharpening economic capabilities, there are 5 main tasks of the central bank, namely:
- As a bank for the government
- The central bank as a commercial bank
- Supervise the activities of commercial banks and other financial banks
- Supervise foreign trade activities
- Print money and ensure that enough money is available
Below we have summarized some frequently asked questions about central banks, as follows:
What is the Role of the Central Bank in Maintaining Financial Stability?
The task of the central bank is to conduct overall supervision of a country's economic activity. This aims to maintain the stability of the financial system. Macroprudential policies are also very important to monitor.
Bank Indonesia acting as the central bank of Indonesia. What is meant by a central bank is a financial institution that is responsible for monetary policy and raises the level of economic activity.
Bank Indonesia is in charge of formulating and implementing Monetary Policy, which aims to limit the amount of money in circulation and, therefore, the prices of goods and services.