CMA Foundation · Fundamentals of Business Economics and Management · Money and Banking
Which of the following is an agency function of a commercial bank rather than a primary function?
Collecting cheques and paying insurance premiums on behalf of customers is an agency function, because the bank acts as the customer's agent. Accepting deposits, granting cash credit and discounting bills are primary functions involving the bank's own deposit-taking and lending business.
- ACollecting cheques and paying insurance premiums on behalf of customersCorrect
- BAccepting fixed deposits
- CGranting cash credit to a business
- DDiscounting bills of exchange
Explanation
Agency functions involve acting on behalf of customers, such as collecting cheques, paying premiums and dividends. Accepting deposits, granting cash credit and discounting bills are primary lending and deposit activities.
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