Question

How do banks mediate between those who have surplus, money and hence those who need money?

Answer 1

The medaited with loan borrowers and depositors mainly. Those who had money deposited them in banks . the bank gives loan to people by these deposits and at the end of the year they collect a bit higher interest from the loan borrowers and pays the interest as well as the amount to the depositors. By this they also earn income from the deposited amount

Answer 2

(i) Banks keep small proportion of their deposit  as cash with themselves.

(ii) Major portion of deposit is used for extending  loans.

(iii) The banks mediate between depositors and  borrowers in this way.

(iv) They charge high rate of interest on loans than  what they offer on deposits.