What do the banks do with the deposits which they are collect from the public
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Banks are considered as a sort of business house only where we actually
buy and sell money. Money is the ultimate finished good. Depositors
viz., public put their money in banks as these financial institutions
lure them with high interest rates on deposits. More the number of
depositors, more is the money credited and this money can then be used
to give loans to other customers for which banks charge interest from
them. So, a cycle of exchange follows. It is barter system of money.
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Explanation:
Answer. Banks accept deposits from the Public and use the major portion of these deposits to extend loans. ... In this way, bank acts as a mediator between those who have surplus funds (the depositors) and those who are in need of these funds (the borrowers).
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