Read the following passage carefully: Any institution which accepts deposits from the public and advances loans is a bank. Banks are broadly…

Read the following passage carefully :

Any institution which accepts deposits from the public and advances loans is a bank. Banks are broadly categorised into :

• Commercial Banks, and

• Central Bank.

Commercial banks accept deposits from public and use these deposits for giving loans. Banks keep a fraction of deposits as reserves. Generally, all depositors do not demand their money at the same time. The Central Bank of a country is responsible for controlling credit creation. The Reserve Bank of India (RBI) regulates the money supply in India through its monetary policy.

On the basis of the above passage and common understanding, answer the following questions :

State the meaning of a Bank.

Mention any two traits that distinguish Central Bank from Commercial Banks.

“Open market operation is the tool used by Reserve Bank of India (RBI) to regulate money supply in the economy.”

Justify the given statement with valid arguments.