Statement–Argument — Should banks offer only one rate of interest for term deposits of varying durations? Arguments: I. No. A single rate would discourage longer lock-ins, pushing depositors to shorter terms and harming maturity management. II. Yes. A uniform rate is simpler for ordinary customers and may nudge more savings into banks.

Introduction / Context:Deposit-rate structures balance simplicity for consumers with incentives that align depositor behaviour to banks’ asset-liability management (ALM). Both arguments can contain relevant policy logic.

Given Data / Assumptions:

• I: Without a term premium, customers may avoid long tenors, worsening ALM.
• II: Simplicity can reduce confusion and improve participation for less financially savvy savers.

Concept / Approach:A strong argument raises a bona fide objective: ALM stability (I) versus user simplicity/participation (II). These are competing but legitimate aims.

Step-by-Step Solution:1) I is strong: differentiated rates price time preference and support stability.2) II is strong: product simplicity can attract and retain marginal savers.3) Because both are significant considerations, both are strong—design choice involves a trade-off (e.g., fewer slabs vs fully uniform rate).

Verification / Alternative check:Many banks use simplified tiering to balance comprehension and ALM needs, reflecting both concerns.

Why Other Options Are Wrong:Choosing only one neglects the countervailing objective; “either” treats them as mutually exclusive when both are substantively valid.

Common Pitfalls:Assuming simplicity and prudent ALM cannot be jointly addressed (e.g., via limited slabs).

Final Answer:If both I and II are strong.