Which one of the following statements correctly describes the meaning of legal tender money ?
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Answer: B. Legal tender is money that the law says must be accepted in payment of debts; a creditor cannot refuse it. In India, RBI currency notes (RBI Act, Section 26) and coins (Coinage Act) are legal tender. So option B.
Watch for: The word 'legal' makes students link it to courts of law.
Why the other options are wrong
- A. Wrong because legal tender has nothing to do with court fees.
- C. Wrong because cheques and drafts are not legal tender and can be refused.
- D. Wrong because legal tender includes paper notes, not only metallic money.
Source to check: NCERT Class 12 'Introductory Macroeconomics', Chapter 3 'Money and Banking'; RBI Act, 1934, Section 26; Coinage Act, 2011
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.