Q. Consider the following statements:

1. Commercial banks mediate between individuals or firms with excess funds and lend to those who need funds.
2. People prefer to keep money in banks because they think their money would be safe with banks only.

Which of the above is / are correct?
Answer: Only 1
Notes: Only the first statement is correct. Commercial banks mediate between individuals or firms with excess funds and lend to those who need funds. People with excess funds can keep their funds in the form of deposits in banks and those who need funds, borrow funds in form of home loans, crop loans, etc. However, people prefer to keep money in banks because banks offer to pay some interest on any deposits made. Thus, A is he correct answer.

This question is part of UPSC Daily 20 MCQ Series Course on GKToday Android app.