CMA Foundation · Fundamentals of Business Economics and Management · Money and Banking
Which of the following is a function that distinguishes a commercial bank from a central bank?
Accepting deposits from the public and lending to businesses for profit is the distinguishing function of a commercial bank. Lender of last resort, credit control through bank rate and CRR, and monetary policy formulation are functions of the central bank, not commercial banks.
- AActing as lender of last resort
- BControlling credit through bank rate and CRR
- CAccepting deposits from the public and lending to businesses for profitCorrect
- DFormulating monetary policy for the country
Explanation
Commercial banks operate for profit by accepting public deposits and granting loans. Lender of last resort, credit control using bank rate or CRR, and monetary policy formulation are central bank functions, so these options do not distinguish a commercial bank.
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