Question

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

Answer 1

No, I do not agree with this statement.

Central bank is the lender of last resort, for it can give cash to the member banks to strengthen their cash reserves position by rediscounting first class bills in case there is a crisis. Member banks can also take advances on short-term securities from the central bank to add to their cash resources at the shortest time.

This facility of turning their assets into cash at short notice is of great use to them and promotes in the banking and credit system economy, elasticity and liquidity.