Question

Commercial Bank was facing a financial crisis due to the crisis of non-performing assets. It went to the RBI for help. What role will RBI play in such a case?

Options

• It acted as a regulator of the Commercial Banks.

• It acted as a banker to the Commercial Banks.

• It acted as a supervisor to the commercial bank.

• It acted as a lender of last resort.

Answer 1

It acted as a lender of last resort.

Explanation:

For commercial banks, the RBI serves as a lender of last resort. When faced with a financial crisis, commercial banks can seek assistance from the Central Bank. The Central Bank lends money to commercial banks in order for them to recover from the crisis and assist the commercial banks.