SSC Economics Sample Paper NCERT Sample Paper-7

  • question_answer
    Which of the following is not a correct difference between commercial banks and other financial institutions?

    A)  The deposits with the commercial banks can be withdrawn on demand or otherwise, whereas deposits kept with other financial institutions are normally contracted for a specified period

    B)  Commercial banks can accept cash deposit and all other negotiable instruments while other financial institutions can accept only cash deposit.

    C)  Commercial banks have day-to-day interactions with the customers while it is not so with financial institutions.

    D)  Commercial banks keep a ratio of their shares with the RBI while it is not so in the case of financial institutions.

    Correct Answer: B

    Solution :

    [b] In any economy, financial institutes play an important role because all the financial dealings and matters are handled and monitored by such institutes. The major components of financial institutes are banks, insurance companies, credit card agencies, investment companies, consumer finance companies, and other specialized financial institutes. Though all the components have a common role to play in the country's economy, there is a significant difference between the banking and non-banking sectors. The banking sectors include commercial banks including private banks, public sector banks, and foreign banks that are mainly responsible for ensuring fiscal stability in the country. On the other hand, the non-banking sector includes all the other components like credit card agencies, investment companies, and insurance companies that are responsible to regulate and monitor lending as well as borrowing of funds. The key difference between banks and other financial institutes is the facility of cash deposits.

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