UPSC Prelims 2018·GS1·economy·money and banking

Which one of the following statements correctly describes the meaning of legal tender money?

Dalvoy logo
Reviewed by Dalvoy
UPSC Civil Services preparation
Last updated 23 May 2026, 3:31 pm IST
  1. AThe money which is tendered in courts of law to defray the fee of legal cases
  2. BThe money which a creditor is under compulsion to accept in settlement of his claimsCorrect
  3. CThe bank money in the form of cheques, drafts, bills of exchange, etc.
  4. DThe metallic money in circulation in a country

Explanation

Legal tender money refers to any official medium of payment recognized by law that can be used to extinguish a public or private debt. If a creditor is offered legal tender in settlement of a debt, they are legally compelled to accept it. Refusal to accept legal tender for a debt means the debt is still considered paid in the eyes of the law, even if the creditor did not physically receive the funds. A) This option describes money used for legal fees, which is a specific application, not the definition. B) This precisely defines legal tender: it is money that *must* be accepted in payment of a debt. C) Bank money in the form of cheques, drafts, etc., is not legal tender. A creditor is not obliged to accept them; they are promises to pay, not the final payment itself. D) While metallic money can be legal tender, this option describes only one form of money and not the inherent characteristic of being legally mandated for debt settlement.
economy: Which one of the following statements correctly describes the meaning of legal tender money?
ShareWhatsAppXTelegram

Related questions

More UPSC Prelims practice from the same subject and topic.