Explain the role of the Reserve Bank of India as the “lender of last resort”.

ANSWER: central bank is an apex institution which controls entire banking system in an economy having sole authority in issuing notes. When

commercial  banks  do  not  get  loan  facilities  from  any  other  sources,  they  approach  the Central Bank  as  a  last  resort.  The  Central  Bank  advances  loans  to  such  banks  against approved securities. Thus, the Central Bank acts as a lender of the last resort.

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