Match each commercial banking concept, service, or regulatory mechanism listed in Column A with its corresponding operational description in Column B.
- Derivative DepositA deposit created when a commercial bank advances a loan to a customer by crediting an account opened in the borrower's name rather than disbursing cash.
- Credit TransferA payment instrument enabling an account holder to settle obligations to multiple creditors simultaneously through a single debit order.
- Bankers' Clearing HouseAn institutional facility where member commercial banks exchange cheques and net off interbank claims against each other.
- Cash Reserve Ratio (CRR)The statutory minimum percentage of customer deposits that commercial banks must maintain with the central bank, acting as a ceiling on secondary deposit expansion.
Answer
Derivative Deposit matches the creation of credit deposits via loan accounts; Credit Transfer matches settling multiple payees via one debit order; Bankers' Clearing House matches the netting of interbank claims and cheque clearing; Cash Reserve Ratio (CRR) matches the mandatory deposit percentage held at the central bank limiting credit expansion.
Derivative Deposit is directly linked to secondary credit creation during loan disbursements. Credit Transfer represents a bulk payment service from a single account debit. Bankers' Clearing House provides interbank cheque clearing and balance settlement. Cash Reserve Ratio (CRR) is the official central bank reserve requirement that regulates loan expansion capacity.
Step-by-Step Solution
Key Concept
Commercial Bank Functions, Services, and Credit Creation Mechanisms