Question

What role of RBI is known as 'Lender of last Resort'?

Answer 1

As a lender of last resort, the Central Bank stands as a guarantor to the Commercial Banks during financial emergencies. A commercial bank may lose confidence of the depositors prompting them to withdraw their deposits enmass. Since cash reserves may run out, pushing the bank into financial cries. It is the central bank during such times That stands By the commercial bank as a guarantor and saves it from insolvency.