What is one of the key functions of commercial banks in the financial system?
Understand the Problem
The question is asking for an identification of a primary function of commercial banks within the financial system from a list of options provided.
Answer
Credit creation.
One key function of commercial banks in the financial system is credit creation.
Answer for screen readers
One key function of commercial banks in the financial system is credit creation.
More Information
Credit creation is vital as it facilitates lending and contributes to the overall economic growth by enabling businesses and individuals to access funds needed for expansion and consumption.
Tips
A common mistake is to focus only on deposit-taking or payment processing without acknowledging the role of credit creation as an economic driver.
Sources
- Functions of Commercial Banks - BYJU'S - byjus.com
- Commercial Bank - Corporate Finance Institute - corporatefinanceinstitute.com
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