Question

For what purpose are a major portion of deposits with banks used?

Answer 1

Dear Student,
Answer to your question is as follows :

People need only some currency for their day-to-day needs. Remaining they hold as deposits with banks.
Banks keep only a small proportion of their deposits as cash with themselves (i.e. to maintain their CRR and SLR requirements)
to pay the depositors who might come to withdraw money from the bank on any given day.
Banks use the major portion of the deposits to extend loans i.e. to meet the loan requirements of the people.
There is a huge demand for loans for various economic activities.
In this way, Banks mediate between people having surplus funds and those who are in need of these funds.

Regards