MCQs on Function of Commercial Banks

A commercial bank is a kind of financial institution which carries out all the operations related to deposit and withdrawal of money for the general public, providing loans for investment, etc. These banks are profit-making institutions and do business only to make a profit.

Following are some of the functions of commercial banks multiple choice questions and answers that will help the students in brushing up their understanding of the concept of commercial bank functions.

Q1. The most widely used monetary policy tool among these is?

(A) Open market operations

(B) Issuing of notes

(C) Close market operations

(D) Discount rate

Answer: A

Q.2 Credit can be created by:


(B) Foreign banks

(C) Commercial banks

(D) Private banks

Answer: C

Q3. Repo Rate means?

(A) Rate offered by banks to their premium customers.

(B) Rate at which RBI offers loan facilities to commercial banks against government securities, with the condition that banks need to repurchase the securities in a short period.

(C) Banks having excess cash can buy securities from RBI with a condition of reselling securities to RBI on a prefixed day and price.

(D) Banks can discount bills of exchange and avail loan from RBI at times when cash is needed.

Answer: C

Q.4 Which of the following rules do not apply to banking companies?

(A) Companies Act

(B) Banking Regulation Act

(C) Reserve Bank of India Act

(D) All of the above

Answer: A

Q5. Increase in cash reserve ratio (CRR) by the RBI will result in:

(A) Initially increase the supply but later on decrease automatically.

(B) No impact on the supply of money in the economy

(C) Decrease the supply of money in the economy

(D) Increase the supply of money in the economy

Answer: C

Q6. Current CRR rate in India is (November 2020)

(A) 5

(B) 2

(C) 4

(D) 3

Answer: D

Q7. Which among these is not a monetary tool?


(B) Deficit financing

(C) Open market operations


Answer: B

Q8. HDFC bank is an example of?

(A) Foreign Bank

(B) Public Bank

(C) Private Bank

(D) None of these

Answer: C

Q.9 Rate of interest is increased by RBI at times of:

(A) Lower inflation

(B) Higher inflation

(C) From the pressure of commercial banks

(D) All of the above

Answer: A

Q10. This is not a function of the RBI?

(A) Printing of currency

(B) Controller of credit

(C) Issuance of coins

(D) Custodian of foreign currency

Answer: C

For reading more such MCQs on various topics pertaining to Commerce visit here

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