Assertion (A) : The Reserve Bank of India acts as the lender of last resort to commercial banks. Reason…
Both statements are correct, but routine repo operations do not explain the lender-of-last-resort role. Repo operations under the LAF provide liquidity as part of monetary…
Choose your answer
Assertion (A) : The Reserve Bank of India acts as the lender of last resort to commercial banks.
Reason (R) : It provides liquidity to banks through repo operations under the Liquidity Adjustment Facility (LAF).
Answer and explanation
Correct answer B
Both statements are correct, but routine repo operations do not explain the lender-of-last-resort role. Repo operations under the LAF provide liquidity as part of monetary management. Lender-of-last-resort support concerns emergency liquidity when normal funding sources are unavailable.
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Himachal Pradesh SET (HP SET)