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Question

Which of the following are primary functions of Commercial Banks?
A. Accepting Deposits
B. Agency Service
C. Discounting Trade Bills
D. Financing Foreign Trade
E. General Utility Service
Choose the correct answer from the options given below:

The correct answer is
A, C & D only

Primary Functions of Commercial Banks

Commercial banks have core responsibilities that define their primary role in the financial system. These functions are essential for their operation and impact the economy significantly.

Key Primary Functions Identified:

  • Accepting Deposits (A): This is a foundational activity where banks gather funds from the public, providing a source for their lending operations.
  • Discounting Trade Bills (C): Banks provide short-term finance by purchasing or advancing money against bills of exchange, facilitating business liquidity.
  • Financing Foreign Trade (D): This involves providing essential financial services for international trade, such as issuing letters of credit and handling foreign exchange.

Secondary Functions Identified:

Other services, while important, are generally considered secondary functions:

  • Agency Services (B): Includes acting on behalf of customers (e.g., collecting checks, paying bills).
  • General Utility Service (E): Encompasses services like locker facilities and issuing drafts.

Conclusion

The primary functions are centered around deposit-taking and lending/financing activities crucial for commerce. Therefore, Accepting Deposits (A), Discounting Trade Bills (C), and Financing Foreign Trade (D) are the key primary functions listed.

The correct option combining these primary functions is A, C, and D only.

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Important Questions from Commercial Banks

  1. Which of the following banks is the largest commercial bank in India?

  2. Which of the following would reduce the credit creation capacity of a Commercial Bank?

    A. Time and Demand deposits

    B. Loans

    C. Deposits with the Central Bank

    D. Cash in hand

    Choose the correct answer from the options given below:

  3. Which one of the following is not the fund based business of commercial banks?

  4. Which of the following are the limitations in the creation of credit of commercial banks?

    A. The amount of cash that commercial banks possess

    B. Supply of collateral security

    C. Monetary policy of the central bank

    D. Allied deposits scheme

    E. Deposits linked with special benefits

    Choose the correct answer from the options given below:

  5. Which of the following statements is correct regarding the commercial paper?

    I. It is unsecured money market instrument issued in the form of a promissory note.

    II. It was introduced in India in 1990.

    III. They are issued by the Reserve Bank of India.

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