About Commercial Banks

A commercial bank is one of the many types of financial institutions and deals in functions relating to withdrawals and deposits, investments, etc. Consumers and small to medium-sized businesses can use commercial banks for basic banking services and products. Services like checking and savings accounts, loans and mortgages, services of deposit (CDs), and safe deposit boxes are only a few services.

Characteristics of Commercial Bank

  • Commercial banks provide basic banking services to consumers and small to medium-sized businesses, such as deposit accounts and loans.
  • Fees and interest income from loans are two of the primary ways that commercial banks generate revenue. 
  • While commercial banks have typically been based on physical premises, an increasing number of them are now operating entirely online.
  • Creating capital, lending, and liquidity are all functions of commercial banks that are critical to the economy. 

Modus Operandi of Commercial Banks

Individual consumers and small to medium-sized businesses can use commercial banks for basic banking services and products. There are a variety of financial services available, such as checking and mortgages, loans, savings accounts, certificates of deposit (CDs), and other types of investment services and services.

Significance of Commercial Banks

They maintain liquidity by borrowing monies from their clients' accounts and lending them out to others. Commercial banks help to create credit, which boosts the economy by increasing output, employment, and consumer spending.

Merits of Commercial Banks

Savings accounts and certificates of deposit (CDs) at commercial banks are popular because they are FDIC-insured and allow customers to conveniently access their money. Customers may withdraw money whenever they want, and their accounts are completely protected up to $250,000. As a result, banks do not have to pay a high price for this money.

Conclusion

The role of commercial banks in the economy is crucial. They not only offer consumers an important service, but they also contribute to the development of the market's capital and liquidity.

Following are some of the multiple choice questions on the Commercial Banks with answers that will help the students in developing their knowledge.

Commercial Banks MCQ

1. What do we call a fee that is collected for using someone's money?

  • Deposit
  • Interest
  • Loan
  • Check

2. The more you add to your savings, the worse off you will be.

  • True
  • False

3. A direct deposit is when you take your paycheck directly to the bank after your receive it.

  • True
  • False

4. Credit cards and debit cards are essentially the same thing.

  • True
  • False

5. Banks offer different kinds of accounts because:

  • Different customers have different needs
  • They have to by law
  • It seems like the fun thing to do
  • They are greedy

6. The higher the interest rate, the better

  • True
  • False

7. The longer the money is saved, the better

  • True
  • False

8. The more you add to yours savings, the better

  • True
  • False

9. The lower the interest rate, the better.

  • True
  • False

10. The shorter the money is saved, the better.

  • True
  • False

11. All bank transactions should be recorded in the register

  • True
  • False

12. You can continue to write checks as long as you have check in your checkbook.

  • True
  • False

13. When depositing money into an account, it is important to:

  • include your account number
  • swipe your credit card
  • thank the teller
  • sign your deposit ticket

14. What do we call the amount left over from your paycheck after taxes and deductions?

  • balance
  • gross balance
  • transaction
  • net pay

15. Which services is a bank likely to offer?

  • net deposit and balance
  • online banking and savings accounts
  • check writing and car wash
  • credit card and Tootsie Rolls

16. Which one of the following are financial institutions?

  • bank and credit union
  • library and hospital
  • school and museum
  • Starbucks and Wal-Mart

17. Trade Credit is usually granted for a period ranging from

  • 20 days to six months
  • 15 days to three months.
  • 15 days
  • three months to one year

18. Under Cash Credit, the bank can refuse credit when the creditworthiness of the borrower is unsatisfactory or when there is shortage of funds.

  • True
  • False

19. In a _______, a customer having a current account with the bank is allowed to overdraw his account up to a specified amount.

  • Cash credit
  • Bank Overdraft
  • Loans & Advance
  • All of above

20. Interest is charged on the amount actually overdrawn and not on the amount sanctioned by the bank.

  • True
  • False

21. _____ implies procuring cash from a bank in exchange for credit instruments.

  • BAnk Overdraft
  • Cash Credit
  • Bills Discounting
  • None of these

22. ____ refers to the credit extended by one business firm to another as incidental to sale or purchase of goods & services.

  • Cash Credit
  • Bills Discounting
  • Installment Credit
  • Trade Credit

23. Trade Credit is also known as 'Mercantile Credit'

  • True
  • False

24. Trade credit includes consumer credit or instalment credit.

  • True
  • False

25. Under secured cash credit, the borrower submits promissory note, which is signed by two or more securities.

  • True
  • False

26. When the cash is not backed up by any security, it is known as ______.

  • Clean Cash Credit
  • Secured Cash Credit

27. _____ is a running account from which the amounts can be withdrawn & paid back from time to time, subject to the stipulated amount.

  • Loan
  • Cash credit
  • Bank overdraft
  • All of above

28. Loans granted for immediate need are called ____

  • Contingency loan
  • Transactional loan

29. Under Cash Credit interest is to be paid on the whole amount from the date of sanction.

  • True
  • False

30. Under ______ borrower withdraws the full amount in cash immediately & undertakes to repay it in one or more installments.

  • Cash Credit
  • Loan
  • Bank overdraft
  • None of these

31. _______ direct advance made in lump sum which is credited to a separate loan account in the name of the borrower.

  • Loan
  • Cash Credit
  • Bank Overdraft
  • Both A & B

32. _____ refer to the deposits of money made by public with non-banking companies.

  • Public Deposits
  • Trade Credit
  • Bank Overdraft
  • Cash Credits

33. When STATE BANK OF INDIA WAS FOUNDED?

  • 1955
  • 1953
  • 1975
  • 1801

34. Which bank is considered one of the upcoming commercial banks in India

  • STATE BANK OF INDIA
  • PUNJAB NATIONAL BANK
  • KOTAK MAHINDRA BANK
  • SOUTH INDIAN BANK

35. Which bank has this tagline " BOOMING LIFE"

  • CANARA BANK
  • KOTAK MAHINDRA BANK
  • AXIS BANK
  • None of these

36. BANK OF BARODA is a private sector bank

  • TRUE
  • FALSE

37. Which bank is India's largest private sector bank in terms of assets and market capitalization

  • ICICI BANK
  • AXIS BANK
  • IDFC BANK
  • HDFC BANK

38. Which banks headquarters is located in Gujarat?

  • INDUSIND BANK
  • BANK OF BARODA
  • ICICI BANK
  • All of above

39. Which bank has the tagline as " CHANGING FACE OF PROSPERITY"

  • YES BANK
  • HDFC BANK
  • LAKSHMI VILAS BANK
  • STATE BANK OF INDIA

40. Which bank is a scheduled commission bank?

  • ICICI BANK
  • LAKSHMI VILAS BANK
  • BANK OF BARODA
  • KARUR VYSYA BANK

41. Why do banks seek to increase the size of their deposits?

  • To allow for more investments
  • To increase their capacity to lend
  • To pay bank employees more
  • Both A & B

42. Commercial banks earn money in all of the following EXCEPT:

  • Investing in other companies
  • Charging fees for their services
  • Taking a percentage off of all deposits
  • Collecting interest on loans

43. Neither income gap analysis nor duration gap analysis are useful tools for telling a financial institution manager the institution's degree of exposure to interest-rate risk.

  • True
  • False

44. It accepts deposits from individuals and organisations that have excess funds and provide loans to those who are in need. This financial institution is called ...

  • investment banks
  • commercial banks
  • credit unions
  • insurance companies

45. Federal funds are not sold by banks to other banks

  • True
  • False

46. Additional measures of bank performance include

  • ROA and ROE
  • ROA, ROE and the NIM (net interest margin)
  • ROE and the NIM
  • All of above

47. Credit Unions

  • These banks specialise in helping large business organisations to raise finance to fund their operations and expansion, usually through helping them to issue an sell stocks and shares on the stock market.
  • These are also known as savings and loans associations or building societies.
  • This is a co-operative, not-for-profit organisation, owned by and for its members. They provide low cost loans for people on low incomes.
  • This type of bank offers services based on the principles of Sharia Law which forbids interest charges and payments.

48. Which of the following best describes an investment bank...

  • These banks specialise in helping large business organisations to raise finance to fund their operations and expansion, usually through helping them to issue an sell stocks and shares on the stock market.
  • These are also known as savings and loans associations or building societies.
  • This is a co-operative, not-for-profit organisation, owned by and for its members. They provide low cost loans for people on low incomes.
  • This type of bank offers services based on the principles of Sharia Law which forbids interest charges and payments.

49. Governments can raise money to finance public spending through the sale of...

  • James
  • Bonds
  • Shares
  • Stocks

50. A deposit account is best described as...

  • A current account, savings account or another type of bank account which allows money to be deposited and withdrawn by the account holder.
  • A safe place to store you savings
  • Used by people for everyday transactions
  • An account where customers can go overdrawn on the amount they hold in it

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