Which bank is referred to as ‘The lender of last resort’?

The correct answer is Central Bank.

Key Points

• The central bank is referred to as ‘The lender of last resort'.
• A lender of last resort (LoR) is a financial institution, usually, a country's central bank, that provides loans to banks and other qualifying entities that are in financial distress or are regarded as highly hazardous or on the verge of collapse.
• The lender of last resort serves to protect depositors and to prevent panicked clients from withdrawing funds from banks with temporary low liquidity.
• Commercial banks often avoid borrowing from lenders of last resort since doing so shows that the bank is in financial distress.

Important Points

• A central bank is a financial entity that administers a country's commercial banking system and regulates its currency and monetary policy. A central bank, unlike a commercial bank, has a monopoly on growing the monetary base.
• The State Bank of India is a multinational public sector bank and statutory organisation located in Mumbai, Maharashtra, India. SBI is the 43rd largest bank in the world, and it is the only Indian bank in the Fortune Global 500 list of the world's largest enterprises for 2020.
• Dena Bank was a state-owned bank that merged with Bank of Baroda in 2019.