What are bank acceptances?

Bank acceptances refer specifically to time drafts that are drawn on and accepted by a bank, making this the correct answer. In the context of banking, a time draft is a specific type of financial instrument that allows businesses to defer payments while still securing financing. When a bank accepts such a draft, it endorses it, thereby taking on the obligation to pay the amount specified on the draft at a future date. This transaction provides assurance to the seller that they will receive payment, and it offers the buyer the flexibility to manage their cash flow effectively.

In contrast, options about checks written to bank employees, personal checks issued by customers, or loan agreements with banks do not capture the essence of bank acceptances. Checks to bank employees represent routine transactions unrelated to financing or acceptance instruments. Personal checks merely involve an individual’s account and do not entail bank acceptance. Loan agreements involve borrowing but lack the characteristics of a time draft, which includes a future payment obligation accepted formally by the bank. Thus, the concept of bank acceptances is specifically highlighted by the definition in the correct choice.