BANKING AFFAIRS

Detailed explanation-1: -As a Banker to Banks, the Reserve Bank also acts as the ‘lender of the last resort’. It 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.

Detailed explanation-2: -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.

Detailed explanation-3: -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-4: -A central bank is a lender of last resort.