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UPSC 2021: 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
(d)3 only
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Not attemptedCorrect Answer: (b) 2 only
The central bank’s ‘Lender-of-Last-Resort’ role is confined to providing emergency liquidity to solvent but illiquid banks; it does not extend to routine lending to private firms or to financing government borrowing. Hence statement 2 alone is correct, while statements 1 and 3 fall outside the classical LOLR remit. ([rbi.org.in](https://www.rbi.org.in/scripts/PublicationsView.aspx?id=14304&utm_source=openai))
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What is the correct answer to this UPSC 2021 Indian Economy question?▼
The correct answer is option (b): 2 only. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this Monetary Policy & Money Supply question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2021, GS Paper 1, as Question 15. It falls under Indian Economy > Monetary Policy & Money Supply.
What is the difficulty level of this UPSC question?▼
This question is rated "moderate". It requires sound conceptual understanding of the topic.
How many UPSC Prelims questions have been asked from Monetary Policy & Money Supply?▼
UPSC has asked 27 questions from Monetary Policy & Money Supply (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.