How do deposits with bank become their source of income?
Answers
Answered by
101
Simple process.We deposit our money in the bank and several people comes bank to tak loan either for small purpose or big.Then bank charges higher compound interest from borrowers and provides us Simple interest on our deposits. The difference between the interest being charged from borrower and interest given to depositer is the main saving of banks.
Answered by
14
Banks use a major portion of the deposits to extend loans to people for various economic activities. The interest rates on loans are much higher than what the bank charges on the deposits it has. Therefore, the difference between what is charged from the borrowers and what is paid to the depositors is the source of income of the banks.
Similar questions