Question

what dothe banks do with the deposits which they collect from the public?

Answer 1

Let's clarify that we are referring to money that is deposited in the account as other than investment option such as Mutual Fund (reason being  Bank has to invest it anyway). 

So by deposit we usually refer to salary account, checking account, savings account, CDs etc. 

All the banks have to maintain certain reserve ratio. So for example, if in a day bank receives $1000 as a deposit, and reserve ratio is 15%, then bank can only use 85% of the $1000 and other $150 has to save with the bank meaning bank cannot use $150. 

For the rest $850, banks invest this money in a form of loan or lending. Loan can be to any individual, or company or may even be to the other bank who is in need of cash flow. 

If this helps, please mark as Brainliest. 

Answer 2

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.