would open all its accounts with it, it would conduct transactions domestically as

1. would open all its accounts with it, it would conduct transactions domestically as well as internationally on behalf of the government, it would issue currency, it would be a bankers' bank, etc. However, its most important function would be conducting the economic and monetary policies of the State as "the central bank will keep a close watch on the general trend of business, employment, income and price spiral in the country and will take necessary steps to promote their general standard and maintain them at the desired levels." [Ibid., 1983, p.98.] Siddiqi also attaches im - mense importance to the "sincere advice and guidance of the central bank" in the conduct of monetary policy. [Ibid,. p.99.] The central bank will not only deter mine the priority sectors where loan finance or Mudarabah finance is required but it will also "inform all the banks regarding any additional capital investment being condu- cive or detrimental to the common interest so that they may refrain from the was - tage of common resources" [Ibid, p.99.] Uzair points out that among the seven functions usually undertaken by modern central banks three main functions will have to undergo significant change when the banking system is reorganized on an interest free basis. (1)These functions are: i. Controlling and regulating of credit, ii. Acting as a lender of the last resort, and iii. Promoting banking development in the country Uzair thinks that the promotion of interest free banking and the conversion of interest based banks to interest free financial institutions would will be one of the prime functions of an Islamic central bank. It can perform this function by providing commercial banks with financial, technical and personnel assistance. Unlike Siddiqi, Uzair does not rule out the possibility that the central bank in an Islamic economy might be organized on the basis of profit. He suggests that an Islamic central bank might acquire equity share in the capital stock of commercial banks as does the Federal Reserve in the United States. This will ensure the central bank a permanent source of revenue and profit in the form of dividends received from commercial banks. There are other advantages in having central banks hold shares in commercial banks. Firstly, there would be no need to charge the commercial bank interest on discounting bills as the central bank would be entitled to a part of the profits of the commercial bank. Secondly, central banks would find that there would be more compliance with their instructions as they would have their rep- resentatives on the boards of directors of commercial banks. Thirdly, central banks as the highest 1. Uzair lists the following functions of an Islamic central bank. (i) Issue of currency (ii) Preservation of internal position and value of the currency of the country (iii) Preservation of external value of the currency and the necessary foreign exchange control and regulation (iv) Control and regulation o f credit in the country (v) Acting as a lender of the last resort (vi) Promotion of banking development in the country along the lines desirable in the national interest, and (vii) Advisor to the Government in economic and financial matters. [Uzair, 1978, p.38] 15