Question

What do banks do with the deposits which they collect from public

Answer 1

Banks play an intermediate role between depositors and borrowers and money keep circulating between them. Banks keep only a small amount of money about 15% of the amount deposited by depositors.
The remaining amount about 85% major portion goes in loans demand by borrowers like people, organizations etc. Banks charged interest rates are higher than they pay to the deposit amounts. By this mediatory process banks earn huge profits.
Some banks invest deposited amount into different businesses and earn profits.

Answer 2

They keep only a small portion of deposit as cash. the reason for keeping this is that they might have to pay the depositors if they come to withdraw the money on any given day and also to meet the loan requirements of the people who want it.