Medium
Open in App
Solution
Verified by Toppr
A bank mediates between those who have surplus money andthose who need money by allowing both to open accounts with it. Banks only keepabout 15% of cash reserves to provide to people who come to withdraw money on adaily basis. Those with surplus money are encouraged to invest with the bankand are paid a certain rate of interest for the same. Those who need loans arerequired to pay an interest on their loans. The difference between payment tolenders and receipt from borrowers comprises the bank’s earnings. Thus, thebank acts as a beneficiary for those with surplus money as well as those whoneed money.
Was this answer helpful?
Similar questions
In India, about 80 per cent of farmers are small farmers who need credit for cultivation.
(a) Why might banks be unwilling to lend to small farmers?
(b) What are the other sources from which the small farmers can borrow?
(c) Explain with an example how the terms of credit can be unfavourable for the small farmer.
(d) Suggest some ways by which small farmers can get cheap credit
Hard
View solution
>
How do banks play an important role in the economy of India? Explain.
Medium
View solution
>
What are the measures adopted by Central Bank to control the volume of credit.
Medium
View solution
>
The poor are usually rejected bank loans in the absence of _____.
Medium
View solution
>
Which of the following is not correct about 'security' of a bank loan?
Medium
View solution
>
