SSC Economics Sample Paper NCERT Sample Paper-6

  • question_answer
    The term 'narrow banking' is best described as

    A)  Banks acting only as payment banks

    B)  Banking by non-banking financial companies

    C)  Limited areas of operation by banks

    D)  banks? lending only to risk free sectors

    Correct Answer: D

    Solution :

    [d] Banks lending only to risk free sectors. A 'Narrow Bank' can be defined as the system of banking under which a bank places its funds in risk-free assets with maturity period matching its liability maturity profile, so that there is no problem relating to asset liability mismatch and the quality of assets remains intact without leading to emergence of sub-standard assets.

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