Question

Which of the following is the secondary function of commercial banks?

• A. Agency function
• B. General utility function
• C. Social function
• D. All of these

Hint:

Bank Functions: Primary = Deposits + Loans. Secondary = Agency services (acting for you) + Utility services (useful extras like lockers).

Answer 1

The Correct Option is A

The functions of commercial banks are divided into primary and secondary functions.

Primary Functions: The core business of banking, which includes (1) accepting deposits and (2) advancing loans.
Secondary Functions: Additional services provided by banks. These are further divided into:

Agency Functions: Where the bank acts as an agent for its customers. Examples include collecting cheques, paying bills, and acting as a trustee.
General Utility Functions: Services available to the public, such as issuing letters of credit, providing safe deposit vaults, and dealing in foreign exchange.

While both (A) and (B) are secondary functions, "Agency function" is a major, distinct category of secondary functions and is the most appropriate answer among the choices. "Social function" is a broader, less defined role. Often questions like this seek the major classifications.