Question

Which of the following makes a financial institution a bank?

• A. Accepting deposits
• B. Lending
• C. Accepting demand deposits
• D. Accepting time deposits

Hint:

Only banks can accept demand (chequable) deposits — the legal test of a bank.

Answer 1

The Correct Option is C

Step 1: List what several financial institutions have in common:
Post offices, NBFCs and cooperative credit societies all take deposits and lend — so these two activities cannot be the test for "bank-ness".

Step 2: Isolate the legally exclusive feature:
Under banking regulation, only banks may issue chequable, on-demand (demand) deposits — this is the feature the law reserves for banks alone, because it lets banks create derivative deposits (credit creation).

Step 3: Conclude:
Since demand deposits are the exclusive, legally-defining feature, that is the correct answer, not general deposit-taking, lending, or time deposits (all shared with non-banks).

Final Answer:
Option C.