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What is the origin of the word "bank"?
What is the origin of the word "bank"?
The word "bank" originated from the words 'Banco', 'Banck', and 'Banque', which all mean 'bench' or 'table' in different languages.
What is the primary function of a bank?
What is the primary function of a bank?
Banks deal in money and credit, performing a variety of functions in modern society, like accepting deposits and lending money.
What is the difference between the interest rate charged on deposits and the interest rate charged on loans?
What is the difference between the interest rate charged on deposits and the interest rate charged on loans?
What type of bank is owned and controlled by the government?
What type of bank is owned and controlled by the government?
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What is the main function of a commercial bank?
What is the main function of a commercial bank?
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Fixed deposits have a higher interest rate than savings deposits.
Fixed deposits have a higher interest rate than savings deposits.
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Current accounts are primarily used by businesses.
Current accounts are primarily used by businesses.
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Recurring deposits have a fixed maturity period.
Recurring deposits have a fixed maturity period.
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Which of these is NOT a type of loan offered by commercial banks?
Which of these is NOT a type of loan offered by commercial banks?
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Which of these is NOT an agency function of commercial banks?
Which of these is NOT an agency function of commercial banks?
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Which type of bank account typically offers the highest interest rates?
Which type of bank account typically offers the highest interest rates?
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Commercial banks cannot issue their own currency.
Commercial banks cannot issue their own currency.
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Central banks are responsible for regulating the money supply in a country.
Central banks are responsible for regulating the money supply in a country.
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What is the name of the central bank of India?
What is the name of the central bank of India?
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Commercial banks are responsible for setting monetary policy in a country.
Commercial banks are responsible for setting monetary policy in a country.
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What is the primary goal of a savings deposit account?
What is the primary goal of a savings deposit account?
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A recurring deposit account requires a fixed amount to be deposited every month for a set period of time.
A recurring deposit account requires a fixed amount to be deposited every month for a set period of time.
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Fixed deposit accounts allow for withdrawals at any time before maturity.
Fixed deposit accounts allow for withdrawals at any time before maturity.
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Which type of bank account is primarily designed for businesses?
Which type of bank account is primarily designed for businesses?
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Commercial banks may charge a small fee for maintaining current accounts.
Commercial banks may charge a small fee for maintaining current accounts.
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Which of these is NOT a benefit of a fixed deposit account?
Which of these is NOT a benefit of a fixed deposit account?
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A passbook is issued for both fixed and recurring deposit accounts.
A passbook is issued for both fixed and recurring deposit accounts.
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Which bank account type is most suitable for someone who wants to save money gradually over a long period?
Which bank account type is most suitable for someone who wants to save money gradually over a long period?
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Central banks are also known as bankers' banks.
Central banks are also known as bankers' banks.
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The designation of the head of a central bank is usually "Chairman".
The designation of the head of a central bank is usually "Chairman".
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Commercial banks are responsible for managing the country's foreign exchange reserves.
Commercial banks are responsible for managing the country's foreign exchange reserves.
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Central banks play a crucial role in promoting financial stability and economic growth.
Central banks play a crucial role in promoting financial stability and economic growth.
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Which of these is NOT typically a general utility service offered by commercial banks?
Which of these is NOT typically a general utility service offered by commercial banks?
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Which of these is NOT a characteristic of current accounts?
Which of these is NOT a characteristic of current accounts?
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Fixed deposit accounts can be opened in joint names.
Fixed deposit accounts can be opened in joint names.
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Recurring deposit account holders are allowed to withdraw funds before maturity.
Recurring deposit account holders are allowed to withdraw funds before maturity.
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Commercial banks provide loans only to businesses.
Commercial banks provide loans only to businesses.
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Commercial banks are prohibited from providing insurance services.
Commercial banks are prohibited from providing insurance services.
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Central banks play a crucial role in ensuring the stability of the banking system.
Central banks play a crucial role in ensuring the stability of the banking system.
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Commercial banks are typically involved in underwriting capital issues.
Commercial banks are typically involved in underwriting capital issues.
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Study Notes
Banking
- Banking is derived from the words "Banco", "Banck", "Banque" meaning "bench" or "table".
- Banks are institutions dealing in money and credit.
- Banks accept public deposits and lend money.
- Profit is generated from the difference in interest rates on deposits and loans.
Banking Regulation Act of India (1949)
- Defines banking as accepting deposits for lending/investment, repayable on demand or otherwise.
- Also includes withdrawal via cheque, draft, order, etc.
Commercial Banks
- Stock banks receiving public and business firm deposits.
- Provide short-term and medium-term loans.
- Classified into scheduled and non-scheduled.
- Scheduled banks are listed in the Reserve Bank of India Act's second schedule.
- Owned by governments, private/foreign businesses.
- Examples: State Bank of India, Bank of Baroda (public sector), Global Trust Bank, Bank of Rajasthan (private), Citi Bank, American Express (foreign).
- State Bank of India is India's largest commercial bank.
Central Bank
- Acts as the leader of the banking system and money market.
- Every country has a central bank regulating money supply and credit.
- The central bank (e.g., Reserve Bank of India, RBI) is the "banker's bank" and carries out the country's monetary policy.
- It occupies a central position in the country's banking system.
- Essentially the apex institution of the banking system, possessing special rights, powers and privileges to control financial sectors.
- Defining characteristic: Acts as the apex/topmost institution in the monetary and banking structure of a given country.
- Examples include, but are not limited to De Cock's definition.
Difference Between Central Bank and Commercial Bank
| Feature | Central Bank (Reserve Bank) | Commercial Bank |
|---|---|---|
| Status | One of the organs of the money market | Owned by shareholders |
| Ownership | Owned by the Government | Profit-making institution, owned by shareholders |
| Objectives | Not profit-oriented, but critical to currency and credit control | Profit-making institution |
| Customers | Banker to the Government | Banker to the general public |
| Note Issue | Has the monopoly of note issue | Cannot issue notes, only cheques |
| Credit Control | Controls based on the country's needs | Creates credit to meet business demands |
Types of Bank Accounts
- Current Account: Typically for businesses; allows for numerous deposits and withdrawals; no interest.
- Savings Account: For the general public; promotes thrift; limited withdrawals; interest is paid on the balance.
- Recurring Deposit Account: Fixed monthly deposits for a set period; interest is paid on accumulated funds; no cheque facility.
- Fixed Deposit Account: Lumpsum deposit; fixed-term; higher interest rates than savings; no withdrawals until maturity period.
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Description
Explore the fundamentals of banking including its definitions, types, and the impact of the Banking Regulation Act of 1949. Learn about commercial banks, their classification, and examples of notable institutions in India. This quiz covers key concepts to enhance your understanding of the banking sector.
