Which practice is prohibited regarding the use of interstate branches?

The prohibition regarding the use of interstate branches focuses on the primary purpose of these branches. Using them primarily for deposit production is restricted because the intent behind establishing interstate branches under federal law is to enhance competition and improve access to banking services, not merely to attract deposits. This practice could lead to an unbalanced market, where certain institutions overly focus on deposit gathering without offering a broader set of services to the community or contributing to local economic needs. The emphasis is on ensuring that interstate branches serve the functional purposes of banks by providing comprehensive banking services rather than primarily serving as vehicles for accumulating deposits.

In contrast, engaging in interbank transactions, providing loans to state residents, and conducting commercial activities are generally permissible as they align with the broader goals of supporting banking operations and fostering economic growth within communities.