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Introduction to Banking

How are banks...

Question

How are banks extending loans to the public?

A

Borrow money from RBI

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B

Credit from money lenders

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C

Cash deposits with banks

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D

Loans from cooperatives

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Solution

The correct option is C
Cash deposits with banks

By keeping cash deposits with banks, banks are extending loans to the public.

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Q. 56. Consider the following Statement with reference to financial Institution in India
1. Banks whose Net NPA level is 5% & above are required to take prior permission from RBI to declare dividend.
2. Under Strategic Debt Restructuring (SDR) scheme Bank can convert loans given to stressed firms into equity.
3. In Stressed asset fund, investors pool their money and buy bad loans from banks.
Which of the above statement(s) is/are correct?

Q. Which of the following statements about banking operations is correct as they help banks to run their shops?
A. The public holds as much currency (M) as it desires to hold with it and therefore any additional money earned by it is placed in the form of deposits with banks.
B. The banks lend all the deposits received by them from public up to the minimum legal cash reserve ratio requirement determined by the RBI. It means banks do not keep any excess cash reserves with themselves.
C. The minimum legal Cash Reserve ratio is set by the RBI.
D. Bank's assets are only in the form of Cash Reserves and loans and its liabilities comprise only of the demand deposits.

Q. Identify the source of money for banks to give loans.

Q. Assertion (A): Banks give loans to cooperatives.
Reason (R): The members of the cooperatives make deposits periodically.

Q. A loan of ₹ 18,600 was received from the bank. If the money paid back after two years was ₹20,396, how much money is paid as interest to the bank?

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