What does clearing enable in the banking system?

• A. Transfers between banks
• B. Interest rate setting
• C. Issuing currency
• D. Customer account opening

Answer: (A)

Clearing is the process that handles payment instructions between banks so money can move from one bank to another. It checks, matches, and aggregates these payments, so each bank knows what it owes or is owed, and funds can be settled across the system. This enables transfers between banks, including payments you make to someone who banks elsewhere, by coordinating and netting obligations before the actual transfer occurs. The other options are not about moving funds between banks: setting interest rates is a central-bank policy function, issuing currency is the prerogative of the monetary authority, and opening customer accounts is a retail banking activity.