Central Bank is the "lender of the last resort". Justify either for or against.

For the statement — The central bank is rightly called the 'lender of last resort'.

Justification:

1. Lends to commercial banks in need — When a commercial bank is in need of funds and cannot borrow from any other source, it can approach the central bank for loans. The central bank lends money by rediscounting their bills or by giving them direct loans.

2. Maintains stability of banking system — By acting as a last-resort lender, the central bank prevents bank failures and panic withdrawals during periods of financial stress, thereby maintaining stability in the banking system.

3. Banker's bank — Since commercial banks keep their cash reserves with the central bank and turn to it in difficult times, the central bank also acts as a banker's bank.