ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Similar to commercial banks, central banks hold assets (government bonds, foreign exchange, gold, and other financial assets) and incur liabilities (currency outstanding). Central banks create money by issuing banknotes and loaning them to the government in exchange for interest-bearing assets such as government bonds.

Detailed explanation-2: -The central bank lends money to government when they are facing liquidity crunch or any type of insolvency. The central bank are the last resort to provide loans to the government against any type of collateral.

Detailed explanation-3: -Heightened regulation standards. Small businesses inherently represent more risk than large corporations, making banks hesitant to lend to them.

Detailed explanation-4: -The banks might not be willing to lend certain borrowers due to the following reasons: (a) Banks require proper documents and collateral as security against loans. Some persons fail to meet these requirements. (b) The borrowers who have not repaid previous loans, the banks might not be willing to lend them further.