Commercial banks are different from development banks in that the latter

Analyze the question: The question asks how development banks differ from commercial banks. The "latter" refers to development banks, so we need a feature that is true of development banks but not of commercial banks.

Concept:

• Commercial banks accept deposits (current, savings, and fixed accounts), lend mostly on a short-term basis, deal in foreign exchange, and are mostly joint-stock companies (limited liability companies owned by shareholders).
• Development banks (e.g., Bank of Industry, Nigerian Agricultural Cooperative and Rural Development Bank) provide medium- and long-term loans for projects in agriculture, industry, and housing. They are usually owned or backed by government, and they do not take deposits from the general public in the way commercial banks do.

Checking each option:

• A. Lend on short-term basis: This describes commercial banks, not development banks. Development banks lend long-term. Wrong.
• B. Pay interest on current accounts only: Commercial banks generally do not pay interest on current accounts, and development banks do not operate in this way. Wrong.
• C. Are mostly joint-stock companies: This describes commercial banks. Development banks are mostly government-owned institutions. Wrong.
• D. Do not deal in foreign currencies: Commercial banks deal in foreign exchange as part of their services, while development banks focus on long-term project finance and do not typically engage in foreign currency dealings. This is the best distinguishing statement among the options.

By elimination, A and C describe commercial banks, B is inaccurate, and D is the only remaining statement that separates the two.

Exam tip: Remember the contrast: Commercial banks = short-term, deposits, foreign exchange, private joint-stock companies. Development banks = long-term, project finance, government-backed. When a question says the "latter," go back and check carefully which of the two items it points to.