ECONOMICS
MONEY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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central bank
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corporation
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national bank
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Federal Reserve System (Fed)
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Detailed explanation-1: -As Banker to banks, the Reserve Bank provides short-term loans and advances to select banks, when necessary, to facilitate lending to specific sectors and for specific purposes.
Detailed explanation-2: -Banks borrow and lend money in the interbank lending market in order to manage liquidity and satisfy regulations such as reserve requirements. The interest rate charged depends on the availability of money in the market, on prevailing rates and on the specific terms of the contract, such as term length.
Detailed explanation-3: -(iii) It acts as a bank of central clearance, settlements and transfers. As all commercial banks have their accounts with the Central Bank, it can easily settle claims of various commercial banks against each other by making debit and credit entries in their accounts.