Discussion
Which of the following is not the fund based business of commercial banks?
Answer: A
Correct answer: D.P. Operation
Depository Participant operations are a fee-based, not a fund-based, activity. The bank holds and transfers securities in dematerialised form on the customer's behalf and earns account maintenance and transaction charges; none of its own funds is committed and no asset or liability is created on its balance sheet.
The other three are fund-based. Deposits create a liability, loans and bill discounting create assets, and each involves the actual deployment or receipt of the bank's funds. The distinction matters because fund-based business carries credit and liquidity risk while fee-based business does not.
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