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Question
Give reasons or explain the following
Central bank acts as a lender of the last resort of commercial banks.
Solution
A central bank is the apex financial institution which performs various important functions such as being the lender of last resort. As the lender of last resort, the central bank is under the obligation to provide funds against securities to the commercial banks as and when needed by them. Thus, by helping the commercial banks in the situation of crisis, the central bank acts as the lender of last resort.
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