ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Commercial banks make money by providing and earning interest from loans such as mortgages, auto loans, business loans, and personal loans. Customer deposits provide banks with the capital to make these loans.

Detailed explanation-2: -Stockholders may also choose to reinvest their dividends in the bank. Banks earn money in three ways: 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.

Detailed explanation-3: -Typically, the ideal loan-to-deposit ratio is 80% to 90%. A loan-to-deposit ratio of 100% means a bank loaned one dollar to customers for every dollar received in deposits it received. It also means a bank will not have significant reserves available for expected or unexpected contingencies.

Detailed explanation-4: -Personal Investment or Personal Savings. Venture Capital. Business Angels. Assistant of Government. Commercial Bank Loans and Overdraft. Financial Bootstrapping. Buyouts.