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Which of the following institutions is referred to as тАШlender of last resortтАЩ?
NABARD
SBI
RBI
SEBI
RBI
The Reserve Bank of India (RBI) is known as the 'lender of last resort' because it provides emergency liquidity to commercial banks that are solvent but face temporary liquidity crises. By acting as the ultimate source of funds when no other institution is willing or able to lend, the RBI prevents systemic financial collapse.
The Reserve Bank of India (RBI) is known as the 'lender of last resort' because it provides emergency liquidity to commercial banks that are solvent but face temporary liquidity crises. By acting as the ultimate source of funds when no other institution is willing or able to lend, the RBI prevents systemic financial collapse.
The Reserve Bank of India was established on 1 April 1935 under the Reserve Bank of India Act, 1934, following the recommendations of the Hilton Young Commission.
The function of 'lender of last resort' is a primary responsibility of central banks globally to maintain financial stability.
RBI provides credit to banks through the Marginal Standing Facility (MSF) and Repo operations when they cannot borrow from the inter-bank market.
This mechanism ensures that a temporary liquidity mismatch does not turn into a solvency crisis, protecting the interests of depositors.
NABARD (National Bank for Agriculture and Rural Development) is the apex regulatory body for agriculture and rural credit in India.
SBI (State Bank of India) is the largest public sector commercial bank in India and functions as a borrower of funds from the RBI, not the regulator.
SEBI (Securities and Exchange Board of India) is the regulator for the securities market in India, not the banking system.
The concept of 'lender of last resort' is central to the 'Safety Net' function of the central bank.
C is correct тАФ The Reserve Bank of India acts as the lender of last resort by extending credit to banks that are unable to secure funds from other sources.
Link this concept with the 'Repo Rate'; as the primary tool for liquidity injection, changes in the Repo Rate by the RBI directly impact the cost of borrowing for banks acting under the lender of last resort mandate.
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