plz explain the meaning of this answer
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Answer:
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Explanation:
I would explain this answer in 3 parts :
Given Answer:
The difference between what is charged from borrower and what is paid to the depositors is the main source of income for the banks.
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Keywords :
- Difference
- charged from borrower
- paid to the depositors
- main source of income.
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Let's understand it..
The Difference between what is charged from borrower and what is paid to the depositors is the main source of income for the banks
=> Charges from borrower ie.
the loan people took so the bank must charge some of the interest.
The people had the money of the bank, so they have to pay to the bank
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The Difference between what is charged from borrower and what is paid to the depositors is the main source of income for the banks
=> Some people you must have seen depositing their money in the bank. And the bank has to give them interest, since people's money was with bank or say, Bank had taken their money, So the bank had to pay here.
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The Difference between what is charged from borrower and what is paid to the depositors is the main source of income for the banks
=> What banks do is that:
They give 6% (say) interest while paying to the depositors.
and They take 8.5% (say) interest while taking charges from the borrowers.
Summarising, They take more(8.5%) and give less(6%), so the remaining (8.5 - 6 = 2.5%) is the main source of income for banks.
This system, is permitted, since it is the main source of income for banks.
Hope it helped you.