Question:
Which function is mainly performed by commercial banks?
Which function is mainly performed by commercial banks?
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The difference between the interest rate a bank charges from borrowers and the interest rate it pays to depositors is called the "Spread." This is the main source of profit for a bank.
Updated On: May 30, 2026
- Printing currency notes
- Accepting deposits and providing loans
- Framing monetary policy
- Collecting taxes
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The Correct Option is B
Solution and Explanation
Step 1: Understanding the Concept:
Commercial banks are financial institutions that act as intermediaries between savers (those with surplus funds) and borrowers (those who need funds for investment or consumption).
Step 2: Detailed Explanation:
• Accepting Deposits: Banks collect money from the public in various accounts (Saving, Current, Fixed).
• Providing Loans: They use these deposits to give loans to businesses and individuals, charging a higher interest rate than what they pay to depositors.
• Other Options: Printing notes (A) and framing monetary policy (C) are exclusive functions of the Central Bank (RBI in India).
Step 3: Final Answer:
The primary functions of commercial banks are accepting deposits and providing loans.
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