Which of the following best describes a Depository Financial Institution (DFI)?

A Depository Financial Institution (DFI) is best defined as a financial institution that accepts deposits from customers and has the capability to process various financial transactions, such as withdrawals, transfers, and payments. This definition encompasses a range of institutions, including banks and credit unions, which are authorized to hold customer funds securely. DFIs play a critical role in the financial system by providing safekeeping for deposits and facilitating monetary transactions, which is essential for both consumers and businesses.

This characteristic is fundamental to understanding the operational functions of DFIs and their role within the broader financial environment, especially regarding how they contribute to liquidity, money supply, and overall economic stability. Recognizing that DFIs can handle a variety of transaction types while safeguarding deposits is key to grasping their significance in financial services.