The ability of non-ADI lenders to make loans comes from ________________.A.having bank deposits as assets.B.having bank deposits as liabilities.C.having a credit license.D.getting income from loans.E.borrowing from a bank.
Question
The ability of non-ADI lenders to make loans comes from ________________.A.having bank deposits as assets.B.having bank deposits as liabilities.C.having a credit license.D.getting income from loans.E.borrowing from a bank.
Solution
The correct answer is E. borrowing from a bank.
Here's why:
Non-ADI lenders (non-authorised deposit-taking institutions) are financial institutions that do not have a banking license, and therefore, cannot accept customer deposits. These institutions include finance companies, securitisation vehicles, and money market corporations.
A. Having bank deposits as assets. This is incorrect because non-ADI lenders cannot accept deposits from customers.
B. Having bank deposits as liabilities. This is also incorrect because, again, non-ADI lenders cannot accept deposits.
C. Having a credit license. This is not necessarily correct. While a credit license allows a company to engage in credit activities, it doesn't provide the funds to make loans.
D. Getting income from loans. This is incorrect because the income from loans is the result of making loans, not the source of funds to make loans.
E. Borrowing from a bank. This is correct. Non-ADI lenders typically get their funds to make loans by borrowing from banks or other financial institutions, issuing bonds or commercial paper, or through equity investments.
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