Question

In the context of commercial bank, which of the following alternative is correct?

1. Deposits are liabilities of banks.
2. Commercial banks are creator of money.
3. Commercial banks accept deposits of the general public.
4. Accept deposits of World Bank for Agriculture and Rural developments.

Options

• (i) and (ii)

• (ii) and (iii)

• (i), (ii) and (iii)

• (i) and (iv)

Answer 1

(i), (ii) and (iii)

1. Deposits are liabilities of banks.
2. Commercial banks are creator of money.
3. Commercial banks accept deposits of the general public.

Explanation:

Deposits are obligations owed by the bank to the depositor because the bank is required to return them to the depositor after a specified date at a rate of interest determined by the nature of the deposit. Commercial banks also create money in the economy. It's done through demand deposits. Demand deposits create greater credit than original deposits. Commercial banks accept deposits from the general public in a variety of ways, including current accounts, fixed deposits, and savings deposits.