Question : The primary function of commercial banks is ___________.
Option 1: Issuing currency notes
Option 2: Granting loans and advances
Option 3: Controlling monetary policy
Option 4: Managing government finances
Correct Answer: Granting loans and advances
Solution : The correct answer is (b) Granting loans and advances.
The primary function of commercial banks is to accept deposits from individuals and businesses and grant loans and advances to borrowers. Commercial banks act as intermediaries between depositors who have excess funds and borrowers who require funds for various purposes, such as starting a business, purchasing a home, or financing their operations. By granting loans and advances, commercial banks play a crucial role in providing credit and facilitating economic activities. While commercial banks may play a role in implementing monetary policy set by the central bank, controlling monetary policy is primarily the responsibility of the central bank itself. Managing government finances is typically carried out by specialized institutions such as central banks or treasury departments, rather than commercial banks.
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