Civil Services Examination · Question 15
In India, the central bank's function as the 'lender of last resort' usually refers to which of the following? 1. Lending to trade and industry bodies when they fail to borrow from other sources 2. Providing liquidity to the banks having a temporary crisis 3. Lending to governments to finance budgetary deficits Select the correct answer using the code given below.
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Answer: (B) 2 only
Explanation
As lender of last resort, the RBI provides emergency liquidity to banks facing temporary crises. Lending to governments is its banker-to-government role.