Central bank also lends money directly to commercial banks. Instead of rediscounting, central bank given loans against the bill of exchange promissory notes, treasury bills, government securities, etc. The direct lending to commercial bank is referred to as the ‘lender of the last resort’ function of central bank.
Explain the “Lender of Last Resort’ function of the central bank.
Answers
Narendra Rajput
Central bank also lends money directly to commercial banks. Instead of rediscounting, central bank given loans against the bill of exchange promissory notes, treasury bills, government securities, etc. The direct lending to commercial bank is referred to as the ‘lender of the last resort’ function of central bank.