UPSC Prelims 2021 – Question 75

Q75. In India, the central bank’s function as the ‘lender of last resort’ usually refers to which of the following?

1. Lending to trade and industry bodies when they fail to borrow from other sources
2. Providing liquidity to the banks having a temporary crisis
3. Lending to governments to finance budgetary deficits

Select the correct answer using the code given below.
a) 1 and 2
b) 2 only
c) 2 and 3 only
d) 3 only

Answer: (b)

• A lender of last resort (LoR) is an institution, usually, a country’s central bank, which offers loans to banks or other eligible institutions that are experiencing financial difficulty or are considered highly risky or near collapse.

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