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Q30 (CDS-II/2022) Economy › Money, Banking & Inflation › Banking operations services Answer Verified

Which one of the following is considered as an agency function of commercial banks in India?

Result
Your answer: —  Â·  Correct: C
Explanation

Commercial bank functions are categorized into primary and secondary functions. Primary functions include the acceptance of deposits and the advancing of loans or overdraft facilities [3]. Secondary functions are further divided into agency and utility services. Agency functions involve the bank acting as an agent for its customers or the government [3]. While accepting deposits and providing overdrafts are primary activities [4], and investment of surplus funds is a core financial management activity [1], the acceptance of income tax payments is a specific agency function. In this capacity, banks act as agents for the government to facilitate tax collection and compliance. Under current regulations, all public and private sector scheduled commercial banks can act as agent banks for the RBI to handle government funds and transactions [3].

Sources

  1. [1] https://gacbe.ac.in/pdf/ematerial/18BCO63C-U2.pdf
  2. [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 4. Management of Foreign Exchange Reserves > p. 68
  3. [4] https://dnpgcollege.ac.in/wp-content/uploads/2023/06/Unit-3-English.pdf
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