The Reserve Bank of India (RBI) recently imposed a monetary penalty on three banks - ₹1.50 lakhs on Dr. Ambedkar Nagarik Sahakari Bank Maryadit, ₹25,000 on Nagarik Sahkari Bank Maryadit, and ₹1 lakh on Ravi Commercial bank for violating the provision of its regulation. The banking regulator has imposed a monetary penalty for contravention of non-compliance with the directions issued to Ravi Commercial Bank on exposure norms and statutory and other restrictions & KYC.
If all the depositors, one day, come to withdraw all the cash, what would be the role played by RBI?
Lender of last resort
The correct answer is **Lender of last resort**.
When depositors withdraw large amounts at once, it can cause a **liquidity crisis** for banks.
- The RBI steps in as the **lender of last resort** by providing emergency funds.
- This prevents **bank failures and maintains public confidence.**
- **(a) Maintaining Foreign Exchange Reserves** → Incorrect. This relates to managing the currency value, not bank liquidity.
- **(c) Maintaining cash reserves** → Incorrect. RBI mandates reserves but does not cover sudden mass withdrawals.
- **(d) Currency issue** → Incorrect. Issuing more currency is a monetary policy function, not an immediate liquidity solution.
Important Questions from Money and Banking
Floating exchange rate is determined by:
Statement (A) Floating exchange rate is determined by supply and demand of Dollar only. (B) Floating exchange rate is determined by supply of the particular currency. (C) Floating exchange rate is determined by the total stock of gold reserve. (D) Floating exchange rate is determined by the demand for the particular currency. (E) Floating exchange rate is determined by the relative supply and demand of the currencies. Choose the correct answer from the options given below:
Which of the following is taken into account in depreciation?
________ was provided by the Government to expand production only if the government was convinced that the economy required a larger quantity of goods.
In India, people are encouraged to open Bank accounts, besides promoting the saving habit. This scheme intends to transfer all the benefits of government schemes and subsidies to account holders directly. This scheme is called:
The central bank performs the following functions:
A. Banker to the public
B. Banker to the banks
C. Banker to the government
D. Lender of the last resort
E. Issues one rupee coins
Choose the correct answer from the options given below:
