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Q.

What are the primary functions of a bank?

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a

Accepting deposits

b

Lending loans

c

Both 1) and 2)

d

None of these

answer is C.

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Detailed Solution

Banks have two primary functions, and they are accepting deposits and lending loans.
Banks accept deposits from those who have surplus funds and lend loans to those who have a deficit of funds. Banks are required to keep some cash reserves with themselves for the depositors to withdraw their deposited amount. Banks cannot lend all the amount deposited by the depositors. The Reserve Bank of India also regulates the interest rates charged on loans given by banks. Banks charge higher interest on loans given out than on deposits accepted by them. The difference in the value of the amount earned as interest is the earning of the bank.

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What are the primary functions of a bank?