Previous Year Question
Consider the following statements. The functions of Commercial Banks in India include:
purchase and sale of shares and securities on behalf of customers.
acting as executors and trustees of wills.
Which of the statement(s) given above is/are correct?
Only 1
Only 2
Both 1 and 2
Neither 1 nor 2
Correct Answer: C
Detailed Solution
Statement 1 is correct. Commercial banks may act as agents of their customers for purchasing and selling shares, government securities, bonds and other permitted securities. Such transactions are undertaken according to the customer’s instructions and the applicable regulatory requirements.
Other agency services may include collecting dividends and interest, collecting bills and cheques, and making specified payments on behalf of customers.
Statement 2 is correct. Commercial banks may also act as executors of wills and as trustees.
An executor administers the estate of a deceased person according to the terms of the will.
A trustee manages property held in trust according to the trust deed and applicable law.
Banks may also offer related fiduciary services as estate administrators, custodians and representatives.
Section 6 of the Banking Regulation Act, 1949 permits banks to undertake agency, securities-related, trust and estate-administration activities in addition to their principal banking business.