In India, the central bank’s function as the ‘lender of last resort’ usually refers to which of the following:
1.Lending to trade and industry bodies when they fail to borrow from other sources.
2.Providing liquidity to the banks having a temporary crisis.
3.Lending to governments to finance budgetary deficits.
Select the correct answer using the code given below:
Answer:
(b)
Core Books/NCERT
The Reserve Bank of India, a Banker to Banks 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. Hence, 2 is correct and 1 and 3 are not correct. Therefore, option (b) is the correct answer.