Question

Why do banks maintain cash balance 1mark question

Answer 1

Banks maintain cash balance so that if any of the depositor comes to withdraw their money then at that time the banks can give them money and at the same time they also use this deposited money to give loans to the lenders and charge interest so that they can use this money to meet their expenses and to pay interest to the depositors.
Always the interest rate of loans are higher then interest rates of deposits.

Answer 2

Banks maintain cash balance so tha t they would have money to give it to the withdrawer when a withdrawer comes to witdraw the money.