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
Arrange the following sequence related to the correction of Excess Demand in correct order:
(A) Increase in Bank Rate by RBI
(B) Problem of excess demand will be corrected
(C) Public will borrow less
(D) Decreases money supply
(E) Loans taken by commercial banks will become costlier/expensive
Choose the correct answer from the options given below:
GLF campaign was initiated by China in 1958. Hence, GLF stands for what?
All the points on the Indifference Curve show the level of satisfaction. Choose the correct option:
Which of the following indicate the development that allows all future generations to have a potential average quality of life that is at least as high as that which is being enjoyed by the current generation?
Why are solar and wind energy not explored on a large scale?
