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Providing liquidity to the banks having a temporary crisis
In India, the Central Bank’s function as the “lender of last resort” typically refers to its role in providing liquidity support to banks and financial institutions during times of financial stress or liquidity shortages. This means that if banks are facing difficulties in obtaining funds from other sources, they can turn to the Central Bank as a last resort to borrow money and meet their short-term liquidity needs. The Central Bank acts as a backstop to maintain stability in the financial system and ensure the smooth functioning of the economy.