BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the parties can approach RBI when their limits are exhausted
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they are not able to get loans from other banks
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RBI can come to the rescue of a bank that is solvent but faces temporary liquidity problems by supplying it with much-needed liquidity when no one else is willing to extend credit to that bank
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All of the above
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Detailed explanation-1: -Lender of Last Resort The Reserve Bank extends this facility to protect the interest of the depositors of the bank and to prevent possible failure of the bank, which in turn may also affect other banks and institutions and can have an adverse impact on financial stability and thus on the economy.
Detailed explanation-2: -The correct answer is 2 only. A lender of last resort (LoR) is an institution, usually a country’s central bank, that offers loans to banks or other eligible institutions that are experiencing financial difficulty or are considered highly risky or near collapse. In India, RBI is the lender of last resort.
Detailed explanation-3: -In India RBI is referred to as the lender of last resort. Reserve Bank of India is the central bank of India. At the time of liquidity crisis faced by the commercial banks, RBI gives loans to the commercial banks to meet their financial crisis and thus, it acts as a lender of last resort.