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Banking Basics Quiz

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Questions and Answers

What is the primary function of a bank?

To invest solely in government bonds

To act as an intermediary between savers and borrowers (correct)

To provide financial advice to customers without lending

To solely collect deposits from savers

Who benefits from depositing money in a bank?

The government, which receives transaction fees

The bank, as it utilizes these deposits to invest

The borrower, who also makes a profit

The saver, who earns an interest rate on their deposits (correct)

According to the Banking Regulation Act of 1949, what defines a 'Banking Company'?

A company that exclusively serves government customers

A non-profit organization servicing financial needs

A company that transacts the business of banking in a specified country (correct)

A company that only provides loans to businesses

What does the term 'banking' encompass as defined by the Banking Regulation Act?

<p>The acceptance and management of deposits and loans</p> Signup and view all the answers

What do banks typically charge when they lend money?

<p>An interest rate to borrowers that is higher than the interest paid to savers</p> Signup and view all the answers

Study Notes

Overview of Banks

Banks are financial institutions performing deposit and lending functions.
They connect savers (those with excess money) and borrowers (those in need of money).

Role of Banks

Savers deposit money in banks to earn interest.
Banks lend money to borrowers at a specified interest rate.
Serve as intermediaries facilitating financial transactions between two parties.

Definitions

Banking Company: Defined by the Banking Regulation Act, 1949, it refers to any company conducting banking business in India.
Banking: Involves accepting public deposits for lending or investment, with an option for repayment on demand or under other conditions.

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Description

Test your knowledge about the functions of banks and their role in the economy. This quiz covers key definitions and concepts related to banking, including the relationship between savers and borrowers. Perfect for students studying finance or banking principles.