Legal tender money

16. Which one of the following statements correctly describes the meaning of legal tender money?
a) The money which is tendered in courts of law to defray the fee of legal cases.
b) The money which a creditors is under compulsion to accept in settlement of his claims.
c) The bank money in the forms of cheque, drafts, bills of exchange, etc.
d) The metallic money in circulation in a country.

Ans: b) The money which a creditors is under compulsion to accept in settlement of his claims.
Explanation:-

• Every currency note bears on its face a promise from the Governor of RBI that if someone produces the note to RBI, or any other commercial bank, RBI will be responsible for giving the person purchasing power equal to the value printed on the note. The same is also true of coins. They are also called legal tenders as they cannot be refused by any citizen of the country for settlement of any kind of transaction .
• There is no complete definition in the options, so we need to choose most suitable, which is b, as legal tender is acceptable by law, which no one can refuse to accept.