Question

Only a part of the total deposits is kept as cash in the bank-safe. Why is this so and
how does this benefit the bank?

SCERT Telangana Class 8 Social Science Ch 7 Money and Banking

Answer 1

To get the answer to this question, you need to first understand that the primary source of income for the banks is interest earned from lending money to other borrowers and also through investment.
Keeping money in the banks safe would not earn any interest and that is why its is beneficial to have the money earning interest through lending and investing.
Hope this is helpful.