Summarize your view as to why banks’ lending in the greater part of our history has significantly resulted into huge and prolonged loan defaults?

Assume Central Bank conducts OMO in the following manner;

 (i) CB purchases 500 million worth bonds from the commercial bank and pays with cheque? 

(ii) CB purchases 500 million worth bonds from an individual who deposits check at commercial bank? 

(iii) CB purchases 500 million worth bonds from an individual who cashes out cheque from commercial bank?

(iv) CB Sales 500 million worth bonds to an individual who pays with Currency?

Answer rating: 100% (QA)

1 Banks indiscriminate lending leads to the loans being given not being vetted properly This is beca... View the full answer