Question

Explain any three loan activity of bank in India

Answer 1

$ASSALAMUALAIKUM$


1) Banks keep only a small proportion of cash with them, say 15%. This is kept as a provision to pay the depositors who might come to withdraw money from the bank on any given day.

2) The major portion of the deposits with the bank is used to extend loans to the general public for various economic requirements such as business, housing, finance etc.

3) Deposits are used to meet the loan requirements of people wherein the bank charges interest rate on loans which is much higher than what it offers on deposits. In this way, the difference between what is charged from the borrowers and what is paid to the depositors is the bank's income.

NOTE :- Credit (loan) refers to an agreement in which the lender (one who gives the money) supplies the borrower (one who is in need of money) with money in return for the promise of future payment. Deposits with the bank refer to the surplus cash that people keep with the bank.

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