Explain the various credit and loan activities of banks with an example
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The depositers deposit money in the bank and get interest. Banks keep only a small propotions of the deposits with them as cash. ... Bank offer very less interest on deposits than what they demand on loans.
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Banks work on the principle of credit and deposit. Bank only retain smaller portion of deposited money in the account and rest all the money of the depositors is used by bank to provide different types of loans to the consumers. All the Expenses of banks are beard by the rate of interest which bank levied on giving the loans. However the rate on depositing money is very less than the interest charged by bank on providing credit.
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