Question

How do banks make profits?

• A. Deposits are taken by the bank.
• B. Deposits are lent out to borrowers.
• C. Money is printed by the banks.
• D. The RBI gives money to banks.

Answer 1

The correct option is B Deposits are lent out to borrowers.

People deposit their money in banks for safekeeping. The banks provide the depositors with interests. The banks, in turn, lend money out to individuals and businesses for higher interests. The difference in the interests is deemed as the profit of banks.