Question

Explain any three loan activities of banks in India.

Answer 1

Banks are financial intermediaries which offer loan for a wide range of economic activities.

1) They keep small proportions of the deposits with them as cash.

2) These deposits are used to offer loans to the borrowers. The bank thus intermediates between those who have surplus funds (depositors) and those who are in need of the funds (borrowers).

3) 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.

The banks offer various types of loans to the borrowers which are categorized as Priority sector loans, corporate loans, Housing loans, Personal loans, student loans, etc. These loans are offered at different interest rates by the banks.