ECONOMICS
CREDIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Banks use these deposits for charitable activities.
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Banks use a major portion of deposits to extend loans.
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Banks use deposits to give bonus to their employees.
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Banks use deposits to set up more branches in the country.
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Detailed explanation-1: -Banks use the major portion of deposits to extend loans. These loans are then recovered with an interest. Banks charge a higher interest for credit than deposits. Hence, the amount they receive is greater than the amount that they lend.
Detailed explanation-2: -Banks use the majority portion of the deposits to extend loans. Therefore, the correct answer is option (d)
Detailed explanation-3: -A customer deposit is usually classified as a current liability, since the company typically provides services or goods within one year of the deposit being made.
Detailed explanation-4: -They make money from what they call the spread, or the difference between the interest rate they pay for deposits and the interest rate they receive on the loans they make. They earn interest on the securities they hold.
Detailed explanation-5: -Deposits with Banks Money which is kept in a bank is safe and it even earns an interest. One can withdraw money from his account as and when required. Since deposit in the bank account can be withdrawn on demand, these deposits are called demand deposits. One can use a cheque; instead of cash to settle payments.