Which one of the following is considered as an agency function of commercial banks in India ?
- A.Acceptance of deposits
- B.Investment of surplus funds
- C.Acceptance of income tax payments
- D.Providing overdraft facilities
Correct answer
Explanation
The correct answer is C, Acceptance of income tax payments. When a bank collects tax, it acts as an agent on behalf of its customer and the government, which is an agency function.
The functions of a commercial bank are grouped into primary functions, which are accepting deposits and lending money, and secondary functions. The secondary functions are split into agency functions and general utility functions. Agency functions are those in which the bank works as an agent of its customer: collecting cheques and dividends, paying taxes, insurance premiums and bills, buying and selling securities, and acting as trustee or executor. General utility functions include lockers, drafts and letters of credit.
A is wrong because accepting deposits is a primary function, the very basis of banking. B is wrong because investing its own surplus funds is the bank's own business, not work done as anyone's agent. D is wrong because an overdraft is a form of lending, which is also a primary function.
Exam tip: Primary = deposits and loans (overdraft, cash credit); agency = collect and pay on a customer's behalf, including taxes.
Practice Questions
View allConsider the following statements : 1. National Payments Corporation of India (NPCI) helps in promoting the financial inclusion in the country. 2. NPCI has launched RuPay, a card payment scheme. Which of the statements given above is/are correct ?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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The National Payments Corporation of India was set up in 2008 as the umbrella body for retail payments in the country, on the initiative of the Reserve Bank of India and the Indian Banks' Association, under the Payment and Settlement Systems Act, 2007.
Read the full explanation →Consider the following statements about the Non-Banking Financial Companies (NBFCs) in India : 1. NBFCs cannot accept demand deposits. 2. All the NBFCs operating in India have to be registered with the RBI. 3. NBFCs form part of the payment and settlement system and can issue cheque drawn on itself. 4. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to the depositors of deposit taking NBFCs. Which of the statements given above is/are correct ?
- A.1 and 4
- B.1, 2 and 3
- C.4 only
- D.2, 3 and 4
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These are two of the three ways the RBI itself says an NBFC differs from a bank. An NBFC lends and invests like a bank, but it cannot accept demand deposits such as savings or current accounts, so statement 1 is correct.
Read the full explanation →Which of the following is not included in the assets of a commercial bank in India?
- A.Advances
- B.Deposits
- C.Investments
- D.Money at call and short notice
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Deposits are money the bank owes to its customers, so they sit on the liabilities side of its balance sheet.
Read the full explanation →With reference to Central Bank digital currencies, consider the following statements: 1. It is possible to make payments in a digital currency without using US dollar or SWIFT system. 2. A digital currency can be distributed with a condition programmed into it such as a time-frame for spending it. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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A central bank digital currency can settle payments directly between countries without the dollar or SWIFT, and it can be programmed with conditions on its use.
Read the full explanation →The Service Area Approach was implemented under the purview of
- A.Integrated Rural Development Programme
- B.Lead Bank Scheme
- C.Mahatma Gandhi National Rural Employment Guarantee Scheme
- D.National Skill Development Mission
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The Service Area Approach, introduced by the RBI in 1989, worked within the framework of the Lead Bank Scheme to plan rural credit village by village.
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