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what role of rbi is known as lender of last resort?
what role of rbi is known as lender of last resort?
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Solution
Commercial banks at times face financial crises and at that time are unable to get funds from any other sources.
In this situation, they seek funds from the central bank in order to tide over the crisis. In India, RBI (Reserve Bank of India) is the central bank and saves commercial banks from bankruptcy.
Due to this reason, RBI is known as the lender of last resort.
Also read:
Credit Creation by Commercial Bank
Difference Between Monetary Policy and Fiscal Policy
Limits to Credit Creation and Money Multiplier
Learn about more questions and answers on business studies and various other commerce topics from our website.
Commercial banks at times face financial crises and at that time are unable to get funds from any other sources.
In this situation, they seek funds from the central bank in order to tide over the crisis. In India, RBI (Reserve Bank of India) is the central bank and saves commercial banks from bankruptcy.
Due to this reason, RBI is known as the lender of last resort.
Also read:
Credit Creation by Commercial Bank
Difference Between Monetary Policy and Fiscal Policy
Limits to Credit Creation and Money Multiplier
Learn about more questions and answers on business studies and various other commerce topics from our website.
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