In India, the central bank’s function as the ‘lender of last resort’ usually refers to which of the following

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2021

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:

(a)

1 and 2

(b)

2 only

(c)

2 and 3

(d)

3 only

Correct Answer

(b)

Explanation

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.

Microtheme: RBIxFunctions —
17 questions asked in Prelims in the past.

[2026] With reference to different Committees in India, consider the following details:
Sl. No. Committee | Objective | Organization under which it was formed
1.R.N. Malhotra Committee | Comprehensive reforms of Insurance sector in India | Insurance Regulatory and Development Authority of India
2.L.C. Gupta Committee | Preparing a roadmap for the introduction of derivatives trading in India | Securities and Exchange Board of India
3.Urjit R. Patel Committee | Preparing a roadmap for reforming bank lending to the Housing sector | Reserve Bank of India
4.Y.H. Malegam Committee | Preparing a roadmap for reforms in Microfinance sector in India | Reserve Bank of India
In how many of the above rows are all the details correctly matched?
- (a) 2 only
- (b) 2 and 3
- (c) 1, 3 and 4
- (d) 2 and 4
Correct Answer: (D) 2 and 4
[2025] Consider the following statements:
I. The Reserve Bank of India mandates all the listed companies in India to submit a Business Responsibility and Sustainability Report (BRSR).
II. In India, a company submitting a BRSR makes disclosures in the report that are largely non-financial in nature.
Which of the statements given above is/are correct?
- (a) I only
- (b) II only
- (c) Both I and II
- (d) Neither I nor II
Correct Answer: (B) II only
[2025] Which of the following are the sources of income for the Reserve Bank of India?
I. Buying and selling Government bonds
II. Buying and selling foreign currency
III. Pension fund management
IV. Lending to private companies
V. Printing and distributing currency notes
Select the correct answer using the code given below:
- (a) I and II only
- (b) II, III and IV
- (c) I, III, IV and V
- (d) I, II and V
Correct Answer: (D) I, II and V
[2024] Consider the following statements:
1. In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of India.
2. In India, Foreign Institutional Investors can hold the Government Securities (G-Secs).
3. In India, Stock Exchanges can offer separate trading platforms for debts.
Which of the statements given above is/are correct?
- (a) 1 and 2 only
- (b) 3 only
- (c) 1, 2 and 3
- (d) 2 and 3 only*
Correct Answer: (C) 1, 2 and 3
[2024] With reference to the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements:
1. There is no minimum capital requirement for wholly owned banking subsidiaries in India.
2. For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals.
Which of the statements given above is/are correct?
- (a) 1 only
- (b) 2 only
- (c) Both 1 and 2
- (d) Neither 1 nor 2
Correct Answer: (D) Neither 1 nor 2
[2023] Which one of the following activities of the Reserve Bank of India is considered to be part of ‘sterilization?
- (a) Conducting 'Open Market Operations'
- (b) Oversight of settlement and payment systems
- (c) Debt and cash management for the Central and State Governments
- (d) Regulating the functions of Non-banking Financial Institutions
Correct Answer: (A) Conducting 'Open Market Operations'
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1.The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.
2.Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.
3.The Governor of the RBI derives his power from the RBI Act.
Which of the above statements are correct?
- (a) 1 and 2 only
- (b) 2 and 3 only
- (c) 1 and 3 only
- (d) 1, 2, and 3
Correct Answer: (C) 1 and 3 only
[2021] 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:
- (a) 1 and 2
- (b) 2 only
- (c) 2 and 3
- (d) 3 only
Correct Answer: (B) 2 only
[2019] Consider the following statements:
The Reserve Bank of India’s recent directives relating to ‘Storage of Payment System Data’, popularly known as data diktat, command the payment system providers that
1. they shall ensure that entire data relating to payment systems operated by them are stored in a system only in India
2. they shall ensure that the systems are owned and operated by public sector enterprises
3. they shall submit the consolidated system audit report to the Comptroller and Auditor General of India by the end of the calendar year
Which of the statements given above is/are correct?
- (a) 1 only
- (b) 1 and 2 only
- (c) 3 only
- (d) 1, 2 and 3
Correct Answer: (A) 1 only
[2018] Consider the following statements:
1.The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.
2.Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
3.Treasury bills offer are issued at a discount from the par value.
Which of the statements given above is/are correct?
- (a) 1 and 2 only
- (b) 3 only
- (c) 2 and 3 only
- (d) 1, 2 and 3
Correct Answer: (C) 2 and 3 only
[2018] Consider the following statements:
1.Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if any account-holders fail to repay dues.
2.CAR is decided by each individual bank.
Which of the statements given above is/are correct?
- (a) 1 only
- (b) 2 only
- (c) Both 1 and 2
- (d) Neither 1 nor 2
Correct Answer: (A) 1 only
[2018] Which one of the following statements correctly describes the meaning of legal tender money ?
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- (b) The money which a creditor is under compulsion to accept in settlement of his claims
- (c) The bank money in the form of cheques drafts, bills of exchange, etc.
- (d) The metallic money in circulation in a country
Correct Answer: (B) The money which a creditor is under compulsion to accept in settlement of his claims
[2017] Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)?
1. It decides the RBI’s benchmark interest rates.
2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
3. It functions under the chairmanship of the Union Finance Minister.
Select the correct answer using the code given below:
- (a) 1 only
- (b) 1 and 2 only
- (c) 3 only
- (d) 2 and 3 only
Correct Answer: (A) 1 only
[2014] In the context of Indian economy which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’?
1. To enable the Central Bank to control the amount of advances the banks can create.
2. To make the people’s deposits with banks safe and liquid.
3. To prevent the commercial banks from making excessive profits.
4. To force the banks to have sufficient vault cash to meet their day-to-day requirements.
Select the correct answer using the code given below:
- (a) 1 only
- (b) 1 and 2 only
- (c) 2 and 3 only
- (d) 1, 2, 3 and 4 only
Correct Answer: (A) 1 only
[2013] The Reserve Bank of India regulates the commercial banks in matters of
(1). liquidity of assets
(2). branch expansion
(3). merger of banks
(4). winding-up of banks
Select the correct answer using the codes given below.
- (a) 1 and 4 only
- (b) 2, 3 and 4 only
- (c) 1, 2 and 3 only
- (d) 1, 2, 3 and 4
Correct Answer: (D) 1, 2, 3 and 4
[2012] The Reserve Bank of India (RBI) acts as a bankers’ bank. This would imply which of the following?
1. Other banks retain their deposits with the RBI.
2. The RBI lends funds to the commercial banks in times of need.
3. The RBI advises the commercial banks on monetary matters.
- (a) 2 and 3 only
- (b) 1 and 2 only
- (c) 1 and 3 only
- (d) 1, 2 and 3
Correct Answer: (D) 1, 2 and 3
[2010] In India, the interest rate on savings accounts in all the nationalized commercial banks is fixed by
- (a) Union Ministry of Finance
- (b) Union Finance Commission
- (c) Indian Bank's Association
- (d) None of the above
Correct Answer: (D) None of the above