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InterviewSolution
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What role of RBI is known as 'lender of last resort'? |
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Answer» When commercial banks have exhausted all resources to supplement their funds at times of liquidity crisis, they approach Central Bank as a last resort. As lender of last resort Central Bank gives guarantee of solvency and provides financial accommodation to commercial banks (i) by red is counting their eligible securities and bills of exchange and (ii) by providing loans against their securities. This saves banks from possible failure and banking system from a possible breakdown. On the other hand Central Bank, by providing temporary financial accommodation, saves the financial structure of the country from collapse. |
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