Q."All banks accept deposits, but not all deposit-taking institutions are banks." Explain this statement with reference to the definition of banking.

This statement tests whether a student understands that BOTH elements of the statutory definition — deposit-taking AND lending/investment — must be present together, not either alone. …

Section 5(b) of the Banking Regulation Act, 1949 defines banking as accepting deposits from the public for the purpose of lending or investment. This means deposit-taking is a necessary but not sufficient condition for an institution to be legally classified as a bank.

Certain institutions accept money from the public in deposit-like arrangements (for example, some non-banking financial companies, chit funds, or cooperative credit societies with limited scope) without necessarily meeting every element of the statutory banking definition, or without holding a banking licence from the RBI — such institutions are regulated under different laws and are not "banks" in the strict Banking Regulation Act sense, even though they too collect money from the public.

Conversely, an institution that only lends its own funds without accepting public deposits (a pure moneylender) is also not a "bank," since the deposit-taking element is missing. …

Treating any institution that collects money from the public as automatically a 'bank' — the statutory test is narrower and requires …