Many a times we read in the newspapers that Banks in India partially implement the Narrow banking. In this context, consider the following statements:
1. In Narrow Banking, Banks just accept deposits and provide loans.
2. In Narrow Banking, there is rarely Asset Liability Mismatch.
Which among the above statements is / are correct ?
[A] Only 1 is correct
[B] Only 2 is correct
[C] Both 1 & 2 are correct
[D] Neither 1 nor 2 is correct
Show Answer
Correct Answer: B [Only 2 is correct]
Notes:
Narrow Banking involves mobilizing the large part of the deposits in Risk Free assets such as Government Securities. It does not mean that the banks limit their activities to only accepting deposits and providing loans
