Sources of Business Finance Test - 9

• Rural population in India normally borrows money from money lenders at higher rates of interest.
• Rural people seek money lenders(Informal source of credit) due to limited expansion of credit by the formal sectors in the rural areas.
• Formal sectors in India are mostly urban biased and increasing their presence in the rural areas will reduce the dependence of rural people on the informal sector.
• Money lenders (Informal sector source) lending system is unregulated, unlike formal sector.
  
• The correct option is A.

A bank draft  is a type of cheque where the payment is guaranteed to be available by the issuing Commercial bank. Typically, banks  will review the bank draft requester's account to see if sufficient funds are available for the cheque to clear.

1. A demand the deposit consists of funds held in an account from which deposited funds can be withdrawn at any time from the depository institution, such as a checking or savings account, accessible by a teller, ATM or online banking.
2. People deposit their savings in banks. They can withdraw their money whenever required. Because the deposits in the bank account can be withdrawn on demand, these deposits are called demand deposits.

1:Banks keep a small proportion of their deposits as cash with themselves. This is usually 15% of their deposits as cash. This amount is kept as a provision to pay the depositors who may come to withdraw the money on any day. This amount is enough because only a small fraction of people come to withdraw money on a given day.
2:The rest of the amount is used by the banks to give money on credit to people who need the credit. A bank charges interest on the loan which it gives to its creditors. The interest rate charged by a bank with no loans is higher than the interest rate given by it on deposits. Thus, interest is the main source of income for banks.

A Bank is a financial institution which is involved in borrowing and lending money. Banks take customer deposits in return for paying customers an annual interest payment. The bank then use the majority of these deposits to lend to other customers for a variety of loans.
Following are the main points :

1. Keep money safe for customers
2. Offer customers interest on deposits, helping to protect against money losing value against inflation.
3. Lending money to firms, customers and home buyers.
4. Offering financial advice and related financial services, such as insurance

Commercial paper is an unsecured, short term debt instrument issued by a corporation, typically for the financing of account receivable, inventories and meeting short term liabilities. They are generally issued at a price less than face value.

Public Account of India means those transactions where the government is merely acting as a banker. 

Examples of those are provident funds, small savings and so on. These funds do not belong to the government. They have to be paid back at some time to their rightful owners. 

The commercial banks do not transact in this account.