Question

Which of the following is a function of a Commercial Bank? Give a reason to support your answer:
i. Acting as a lender of last resort
ii. Deciding what is legal tender
iii. Determining monetary policy
iv. Providing cash credit facility.

Answer 1

iv. Providing cash credit facility: In this case, the entire sanctioned amount of loan by the bank is not given to the borrowers at a particular time. The borrower is allowed to withdraw the sanctioned amount as and when he requires money. The bank charges interest only on the actual amount withdrawn from the bank.