WBCS.LIVE practice question

Which organization is known as the 'Lender of Last Resort' in India?

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

Answer options

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

Correct answer and explanation

Correct answer: RBI

Explanation: āœ… Correct Answer: (C) RBI šŸ“š Explanation: The Reserve Bank of India (RBI) acts as the 'Lender of Last Resort'. This means that when commercial banks face a liquidity crisis and cannot raise funds from other sources, they can approach the RBI for loans. This function ensures the stability of the banking system and prevents bank failures that could lead to a wider economic collapse. The RBI provides these funds usually against government securities.