Question

Explain the loan activities of Bank.​

Answer 1

$\large\blue{Loan\: activities\: of\: bank}$

• Banks use the majority portion of the deposits to extend loans. There is a great demand for loans for various economic activities like vehicle loans, education loans, housing loans, personal loan etc. Banks charge a higher interest rate on loans other than what they offer on deposits.

Answer 2

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Loan activities of Bank

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♦Banks keep only a little proportion of their deposits as cash with themselves.

♦Nowadays banks in India hold about 15% of their deposits as cash.

♦This amount is kept as a provision to pay the depositors who might come to withdraw money from the bank on any given day.

♦Banks use the majority portion of the deposits to extend loans.

♦There is a great demand for loans for various economic activities like vehicle loans, education loans, housing loans, personal loan etc.

♦Banks charge a higher interest rate on loans other than what they offer on deposits.

♦The difference between the amount that is charged from borrowers and what is paid to depositors is their main source of income for banks.