Question

In the context of the Commercial Banks, which of the following statements are correct? (Choose the correct option)
(I) Deposits received are liabilities for Commercial Banks.
(II) They are creator of credit in the economy.
(III) They accept deposits from general public.
(IV) They accept deposits on behalf of Reserve Bank of India.

• A. (I), (II) and (III)
• B. (II) and (III)
• C. (I) and (II)
• D. (I) and (IV)

Hint:

Commercial Banks = Accept public deposits + Creator of credit + Deposits are liabilities.

Answer 1

The Correct Option is A

Commercial Banks’ deposits are liabilities, they create credit by lending, and they accept deposits from the public. They do not accept deposits on behalf of the Reserve Bank of India; RBI deals with the government and other banks.