ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -Banks generally make money by borrowing money from depositors and compensating them with a certain interest rate. The banks will lend the money out to borrowers, charging the borrowers a higher interest rate and profiting off the interest rate spread.

Detailed explanation-3: -Banks use the money deposited on savings accounts to lend to borrowers, who pay interest on their loans. After paying for various costs, the banks pay money on savings deposits to attract new savers and keep the ones they have.

Detailed explanation-4: -When you’re earning interest on your deposit accounts, the bank or credit union is paying you. In exchange for those interest payments, the financial institution will put those funds to work by lending it to someone else and charging them interest. The bank will charge a higher rate for that loan.