Commercial Banking Functions Quiz

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30 Questions

A commercial bank is a non-profit organization that deals with money and credit.

False

Modern banking has been in existence since ancient times.

False

Commercial banking has no significant impact on a country's economic activity and industrial progress.

False

Commercial banks only accept deposits from businesses, not from the public.

False

Commercial banks do not create credit by making advances to people in need.

False

Commercial banks act as a mobilizer of spending rather than savings in the economy.

False

Banks grant loans for a very short period, generally not exceeding 30 days to the borrowers against collateral securities.

False

Term loans have a maturity period varying between 1 to 5 years.

False

Participation loans or consortium finance are types of short-term loans provided by banks.

False

When a bank grants a loan to its customer, it pays the amount in cash.

False

The creation of credit by banks involves the bank creating physical cash for the borrower.

False

Commercial banks promote the use of credit cards among their customers.

False

Banks prefer settling debts through cash over cheques.

False

Commercial banks do not provide facilities for fund remittance from one place to another.

False

Secondary functions of commercial banks do not include agency services.

False

Banks do not collect dividends and interest on shares and debentures for their customers.

False

Income tax returns preparation is not part of the services that banks offer to their customers.

False

Cheques are not considered a developed type of credit instrument in the money market.

False

Derivative deposits are also known as passive deposits.

False

When a bank grants a loan, the customer receives the money in cash immediately.

False

Deposits can only arise from granting loans by a bank.

False

When a bank buys government securities, it pays the purchase price in cash immediately.

False

Bank loans do not have any impact on creating deposits according to the text.

False

Derivative deposits are considered as bank money or credit.

True

All bills in hand at the date of the balance sheet are shown on both sides of the balance sheet.

True

Bank capital represents the debt or borrowing funds of a bank.

False

Higher proportion of capital to deposits provides less protection to depositors.

False

Banks maintain higher capital accounts compared to other businesses.

False

Capital is a more important source of funds for large banks than for small banks.

False

Special reserve accounts involve setting aside cash for unanticipated losses on loans and investments.

False

Test your knowledge of the primary and secondary functions of commercial banks, including their role in settling debts, remitting funds, providing agency services, and general utility services.

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