Question

Explain how banks acts as a mediator between people with surplus fund and people who need fund

Answer 1

by online banking system

Answer 2

Explanation:

A bank mediates between those who have surplus money and those who need money by allowing both to open accounts with it. Banks only keep about 15% of cash reserves to provide to people who come to withdraw money on a daily basis. Those with surplus money are encouraged to invest with the bank and are paid a certain rate of interest for the same. Those who need loans are required to pay an interest on their loans. The difference between payment to lenders and receipt from borrowers comprises the bank’s earnings. Thus, the bank acts as a beneficiary for those with surplus money as well as those who need money.