Question

Which of the following is a function of a commercial bank? Give a reason to support your answer:

Options

• Acting as a lender of the last resort.

• Deciding what is legal tender.

• Determining monetary policy.

• Provide cash credit facility.

Answer 1

Provide cash credit facility.

Reason:

A commercial bank is responsible for providing cash credit facilities. Commercial banks provide cash credit as part of their lending services, allowing firms to withdraw funds as needed up to a predetermined credit limit. This helps to meet short-term cash needs or working capital requirements.