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_________ accepts deposits from the public and lend out this money to interest earning investment projects.
  • a)
    Commercial Bank
  • b)
    Central Bank
  • c)
    RBI
  • d)
    All of these
Correct answer is option 'A'. Can you explain this answer?
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_________ accepts deposits from the public and lend out this money to ...
When a commercial bank receives deposits, it keeps a part of it with the Central bank and a part with itself. These are called legal reserves. The money lent comes back to it as deposits. Again it keeps a part of it with the central bank and a part with itself and lends the rest. This process continues. In this way bank gives loans which is many a times the original deposit.
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