Question

Assertion (A): Demand deposits are repayable by banks on demand.

Reason (R): Commercial banks pay interest on the demand deposits.

Options

• Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is true but Reason (R) is false.

• Assertion (A) is false but Reason (R) is true.

Answer 1

Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

Explanation:

Both statements are factually correct, but they lack a concrete cause and effect relationship. While demand deposits are strictly withdrawable on demand and banks do pay interest on savings accounts, the ability to withdraw funds immediately is due to banking liquidity agreements rather than interest payments.