ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Either A or B
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None of the above
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Detailed explanation-1: -The central bank is referred to as the lender of last resort as it saves banks from possible failure and the banking system from a possible breakdown. In case commercial banks fail to meet their financial requirements from other sources, they can approach the central bank for a loan as a last resort.
Detailed explanation-2: -Lender of Last Resort 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-3: -The Federal Reserve, or other central bank, typically acts as the lender of last resort to banks that no longer have other available means of borrowing, and whose failure to obtain credit would dramatically affect the economy.
Detailed explanation-4: -RBI is the lender of last resort for Commercial Banks.
Detailed explanation-5: -A central bank is a lender of last resort.