Q.13. Keeping in mind the loan activities of banks ask the following questions to your parents
friend/teacher.
(ii) Is it a public bank or a private bank?
..
Answers
Answer:
Banks keep only a little proportion of their deposits as cash with themselves.
Nowadays banks in India hold about 15% of their deposits as cash.
This amount is kept as a provision to pay the depositors who might come to withdraw money from the bank on any given day.
Banks use the majority portion of the deposits to extend loans.
There is a great demand for loans for various economic activities like vehicle loans, education loans, housing loans, personal loan etc.
Banks charge a higher interest rate on loans other than what they offer on deposits.
The difference between the amount that is charged from borrowers and what is paid to depositors is their main source of income for banks.
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