Chapter 6: Banking — Online MCQ Test
ECONOMICS · CLASS 12th · Tamil Nadu State Board
Practice Chapter 6: Banking with a free chapter-wise online MCQ test.
This chapter covers: Describes the structure of a country's banking system the core functions of commercial banks such as accepting deposits lending and credit creation and the regulatory role of the c....
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Chapter 6: Banking — Important Questions & Answers
Which of the following is the main function of a commercial bank?
- A. Printing currency notes
- B. Accepting deposits and lending money
- C. Controlling inflation directly
- D. Setting fiscal policy
Answer: B. Accepting deposits and lending money
Commercial banks primarily accept deposits from the public and lend funds to borrowers. This is their core banking function.
Commercial banks primarily accept deposits from the public and lend funds to borrowers. This is their core banking function.
The institution that acts as the banker to the government in India is the ______.
- A. State Bank of India
- B. Reserve Bank of India
- C. Canara Bank
- D. Indian Bank
Answer: B. Reserve Bank of India
The Reserve Bank of India performs the role of banker to the government. It manages government accounts and transactions.
The Reserve Bank of India performs the role of banker to the government. It manages government accounts and transactions.
When a bank gives a loan, it creates credit mainly because it does not hand over all cash to the borrower at once. This is called ______.
- A. Cash reserve
- B. Credit creation
- C. Balance transfer
- D. Capital formation
Answer: B. Credit creation
Credit creation occurs when banks provide loans by creating deposits in the borrower’s account. This expands the money supply in the economy.
Credit creation occurs when banks provide loans by creating deposits in the borrower’s account. This expands the money supply in the economy.
Which of the following statements best explains the role of commercial banks in economic development?
- A. They only store money safely
- B. They mobilize savings and channel them into productive investment
- C. They print currency for circulation
- D. They decide government expenditure
Answer: B. They mobilize savings and channel them into productive investment
Commercial banks mobilize public savings and lend them to productive sectors. This supports investment, employment, and growth.
Commercial banks mobilize public savings and lend them to productive sectors. This supports investment, employment, and growth.
Which of the following is the most accurate statement about banking sector reforms in India?
- A. They reduced competition and customer choice
- B. They aimed at improving efficiency, profitability, and customer service
- C. They ended the need for regulation by RBI
- D. They removed all priority sector lending requirements
Answer: B. They aimed at improving efficiency, profitability, and customer service
Banking sector reforms were introduced to improve efficiency, competitiveness, and service quality in the banking system. Regulation by RBI continues even after reforms.
Banking sector reforms were introduced to improve efficiency, competitiveness, and service quality in the banking system. Regulation by RBI continues even after reforms.