What is the purpose of granting security over assets under the bank act?

The purpose of granting security over assets under the Bank Act is fundamentally to ensure that loans and advances made by financial institutions are secured. This security serves as a form of protection for the lender; it gives the bank a claim on the debtor's assets in the event that the borrower fails to repay the loan. By securing the loan with specific assets, the bank can minimize its risk and increase the likelihood that it will recover the funds lent.

When a borrower provides security, it creates a legal obligation that can help facilitate financial transactions and encourage lending, as banks have assurance that they will have recourse to assets if needed. This practice promotes responsible lending and borrowing practices within the financial market.

Other options do not align with the core function of security under the Bank Act. Eliminating all debts is not a realistic or achievable goal in the context of secured lending. Allowing free trade of crops does not relate to the concept of financial security in loans and will be more associated with agricultural policies rather than banking principles. Lastly, obtaining interest-free loans contradicts the basic economic principle where lenders seek to earn returns on their investments, making the idea of interest-free loans an atypical element in traditional lending practices.