Define loan activity

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Define loan activity

Posted by Mahesh Prasad Sahu 7 years ago

CBSE > Class 10 > Social Science

2 answers

Aman Mishra 7 years ago

Banks take deposits and paid small interest on it. Banks give loans to borrowers and put large interest on ît. This difference in interest rate become the earning of bank.

1Thank You

Gaurav Seth 7 years ago

1) Banks keep a small proportion of their deposits as cash with themselves to pay the depositors who might come to withdraw money from the bank on any given day.

2) Banks use the major portion of the deposits to extend loans. In this way, banks mediate between those who have surplus funds (the depositors) those who are in need of these funds (the borrowers). Banks charge a higher interest rate on loans than what they offer on deposits. The difference between what is charged from borrowers and what is paid to depositors is their main source of income.

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