Question

State whether you agree or disagree. Give reasons.
A co-operative bank acts as a lender of last resort.

Answer 1

I disagree with the statement.

The central bank lends money to commercial banks. When the commercial banks are facing liquidity crunch or any type of insolvency, the central bank are the last resort to provide loans against treasury bills, government securities, and bills of exchange. Even at the time of insolvency or any type of debt, the government approaches central bank for the loan. Therefore, central bank acts as a lender of last resort and not the a co-operative bank.