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Consider the following statements. (a) Letter of credit is a primary function of commercial bank. (b) There is no difference between current account deposits and saving account deposits of a commercial bank. (c) Credit money is created by the central bank of a country. Which of the statement/s given above is/are incorrect ?

Consider the following statements. (a) Letter of credit is a primary function of commercial bank. (b) There is no difference between current account deposits and saving account deposits of a commercial bank. (c) Credit money is created by the central bank of a country. Which of the statement/s given above is/are incorrect ? Correct Answer All of the above

The correct answer is All of the above.

Key Points

  • Primary functions of commercial bank include accepting deposits, granting loans, advances, cash, credit, overdraft and discounting of bills.
  • Secondary functions include issuing letter of credit, undertaking safe custody of valuables, providing consumer finance, educational loans, etc. Hence, statement 1 is incorrect.
  • While a savings account is one wherein you deposit your savings with the bank and earn interest on the same, a current account is one where you deposit money to carry out business transactions. Hence, statement 2 is incorrect.
  • Under savings account, interest on savings is earned by the account holder, but in current account, banks generally do not provide interest on deposits because the deposited money has to be used in business transactions.
  • The most important function of a commercial bank is the creation of credit. Hence, statement 3 is incorrect.

Related Questions

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