Question

What do the bank do with the deposit which they accept from the public?

Answer 1

We know that banks accept the deposits from people who have surplus money and also pay an interest on deposits.

But banks keep only a small portion(15% in India) of their deposits as cash with them.

This is kept as provision to pay the people who might come to withdraw money from their accounts in the bank on any day.

They use the major portion of the deposits to extend loans to those who need money.

Hope this helps you!!

Answer 2

The bank provides money to those who are in need of money (the borrowers) by taking money from those who deposit their money in the banks (the depositers).

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