Question

6. Banks use the major portion of the deposits to:
(a) Keep as reserve so that people may withdraw
(b) Meet their routine expenses
(c) Extend loans
(d) Meet renovation of bank​

Answer 1

Answer:

Major portion of the deposits is used by banks for extending loans to borrowers.

Some portion is used as cash reserve ratio with the RBI.

Some portion of money is used as statutory liquid ratio deposit with the bank itself as set by RBI.

Answer 2

The correct answer is Option(c) Extend loans,

• The major objective of the bank is to give loans to the borrowers, the bank earns huge profit, as the borrowers have to give interest.
• This helps to bank to grow and be stable in the economy.
• Deposits are not reserved for withdrawal, they keep a certain amount but most of the money is available to extend loans.
• Routine expenses can be easily met, as banks keep some amount for day-to-day expenses.
• Many commercial banks get funding from the government, banks are there to provide financial services to their customers.