Question

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

Answer 1

The banks use the major portion of the deposits to extend loans to those who need money, charging them slightly higher interest than what they pay to the depositors. This difference is the major source of income for banks. In this way banks mediate between those who have surplus money and those who need money.

Answer 2

banks keep small deposit as cash for themselves the use the major portion of the deposits to expand loans to those who needs money in this way banks do this