WBCS.LIVE practice question

Which of the following is also known as the ‘Lender of the last resort’?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. SEBI
  2. RRBs
  3. RBI
  4. SBI

Correct answer and explanation

Correct answer: RBI

Explanation: The Reserve Bank of India (RBI) is called the ‘Lender of the last resort’ because it provides emergency financial assistance to commercial banks and financial institutions when no one else is willing to do so. This ensures stability in the banking system and prevents bank failures from spreading to the entire economy. In such situations, RBI lends money even if adequate collateral is not available, thereby safeguarding public confidence and financial stability.