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      Question

      Which of the following businesses is the Reserve Bank

      expressly prohibited from transacting under Section 19 of the RBI Act, 1934?
      A Purchase and sale of foreign exchange Correct Answer Incorrect Answer
      B Custody of monies and securities Correct Answer Incorrect Answer
      C Issue of demand drafts and telegraphic transfers Correct Answer Incorrect Answer
      D Allowing interest on deposits or current accounts Correct Answer Incorrect Answer
      E Purchase and sale of Government securities Correct Answer Incorrect Answer

      Solution

      Section 19 lists businesses which the Bank may not transact. Among these, clause (6) prohibits the Bank from allowing interest on deposits or current accounts. The section also bars the Bank from engaging in trade, purchasing shares of any banking company, advancing money on mortgage of immovable property, making loans (save as otherwise provided), and drawing or accepting bills payable otherwise than on demand. Allowing interest on deposits or current accounts is therefore a prohibited activity.

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