Assertion (A) : Taking of deposits and granting of loans single out banks. Reasoning (R) : Banks act as intermediaries when they mobilize savings from surplus units to shortage units in order to finance productive activities. Codes :
Assertion (A) is correct and Reasoning (R) is the correct explanation of (A).
Assertion (A): Accepting deposits from the public and lending or investing those funds are the two defining activities of a bank; the Banking Regulation Act, 1949 defines banking in exactly these terms. These twin functions distinguish banks from other businesses, so (A) is true.
Reasoning (R): Banks are financial intermediaries. They collect the savings of surplus units (households and others with idle funds) and pass them on as loans to deficit units (firms and others needing funds) for productive use. So (R) is also true.
Link: Deposit-taking is the mobilisation of savings from surplus units and lending is the channelling of those savings to shortage units. The intermediation role in (R) is precisely why these two activities single out banks, so (R) correctly explains (A).
Hence, the answer is Assertion (A) is correct and Reasoning (R) is the correct explanation of (A)..
Similar Questions
Match the items of List - I with List - II in terms of functions of a bank :
List - I List - II (Activities) (Functions) (a) Underwriting (i) Primary Functions (b) Transfer of funds (ii) Granting Advances (c) Overdraft (iii) Utility Functions (d) Recurring Deposits (iv) Agency Functions Codes :
(a) (b) (c) (d)
Interest earned by a depositor against a deposit with a commercial bank for custodial service :
The profitability of public-sector banks is low due to
(i) Over-cautions approach to lending
(ii) Reserve Bank Policies
(iii) High Overhead Costs
(iv) Social-sector lending
Identify the correct code :
Codes :
According to the recent guidelines (2013) of the Reserve Bank of India the Private Sector Banks are required to have a minimum paid up equity capital of
According to the FDI Policy of the Government of India (2012), the FDI in banks is limited to
Match the items of List – I with List – II :
List – I List – II a. RBI Nationalization i. 1964 b. Imperial Bank Nationalization ii. 1949 c. Nationalization of 14 Commercial Banks iii. 1955 d. Establishment of IDBI iv. 1969 Identify the correct combination :
Codes :
a b c d
Select the major principles which banks strive to incorporate in their working from the following :
(a) Profitability
(b) Labour welfare
(c) Social welfare
(d) Safety
(e) HRD
(f) Liquidity
Codes :
Important Questions from Commercial Banks
Which of the following banks is the largest commercial bank in India?
Which one of the following is a primary function of commercial banks?
Which of the following is/are function(s) of a commercial bank?
- Accepting deposits
- Giving loans
- Payments and settlements
Imposition of price _______ below the equilibrium price leads to excess _______.
- Which of the following are liabilities of commercial banks ?
I. Capital and reserves
II. Cash and balances with RBI
III. Investments
IV. Borrowings
Codes :
