Which of the following is not a function of commercial banks?
Options
AAccepting deposits
BGranting loans
CIssuing currency
DAgency functions
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Money MarketPYQ - May 2022 (Inter)Question 158 of 20
All Questions Correct Answer
✅ Option c — Issuing currency
All Options:
- AAccepting deposits
- BGranting loans
- CIssuing currency
- DAgency functions
Detailed Solution & Explanation
To determine which option is not a function of commercial banks, let's analyze each option:
• Accepting deposits is a primary function of commercial banks, as they collect funds from customers and provide a safe place for their money.
• Granting loans is another key function, where banks use deposited funds to lend to borrowers, earning interest income.
• Issuing currency is not a function of commercial banks, as this is typically the responsibility of a country's central bank, which controls the money supply and regulates the economy.
• Agency functions, such as facilitating transactions and providing services like bill payments, are also performed by commercial banks.
The correct answer is the option related to issuing currency, as this is a function of the central bank, not commercial banks. The other options are incorrect because accepting deposits and granting loans are fundamental activities of commercial banks, and agency functions are also a part of their services. This is based on the economic concept of the role of commercial banks in the financial system, as defined by banking laws and regulations.
About This Chapter: Money Market
Paper
Paper 4: Business Economics
Weightage
10%
Key Topics
Money Demand/Supply, Monetary Policy
This chapter covers the monetary system — how money circulates in the economy. Topics include Demand for Money, Supply of Money, Monetary Policy instruments (Repo Rate, CRR, SLR, Open Market Operations), and the role of the Reserve Bank of India in controlling inflation and managing the economy.
View Official ICAI SyllabusExam Strategy Tip
Memorize the RBI's monetary policy instruments and their impacts. Questions often ask about the effect of changing CRR or Repo Rate on money supply.
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