Which among the following statement gives the most correct definition of “Lender of Last Resort”?
Which among the following statement gives the most correct definition of “Lender of Last Resort”?
[A]If a person or firm which is eligible to get a loan, does not get it from any commercial bank, may approach to Reserve Bank of India for loan.
[B]If the state governments are in crisis and need money for short term , they can approach RBI for this purpose
[C]If a commercial bank is in crisis, it may place its reasonable demand for accommodation to Reserve Bank of India
[D]Whenever the government declares a debt relief, the RBI will have to bear the brunt of it.
If a commercial bank is in crisis, it may place its reasonable demand for accommodation to Reserve Bank of India
The banks can borrow from the RBI by keeping eligible securities as collateral or any other arrangement and at the time of need or crisis, they approach RBI for financial help. Thus RBI works as Lender of the Last Resort (LORL) for banks.