0 votes
14.3k views
in Class X Social Science by Expert (38.0k points)
What do the banks do with the 'Public Deposits'? Describe their working mechanism.

Please log in or register to answer this question.

1 Answer

0 votes
by Expert (73.6k points)
Banks accept deposits from the Public and use the major portion of these deposits to extend loans. There is a huge demand for loans for various economic activities. Banks make use of these deposits to meet the loan requirement of the people and thereby earn interest. This is, infact, the main source of income of the bank. In this way, bank acts as a mediator between those who have surplus funds (the depositors) and those who are in need of these funds (the borrowers). Banks charge a higher interest rate on loans than what they offer on deposits.

Related questions

0 votes
1 answer
0 votes
1 answer
0 votes
1 answer
0 votes
1 answer

Categories

/* */