Question

Identify the main source of income for banks.

• A. Renting out assets attached as collateral for loans
• B. Collecting high interest on loans and offering low interest on savings
• C. Collecting low interest on loans and offering high interest on savings
• D. Collecting charges for transactions

Answer 1

The correct option is B Collecting high interest on loans and offering low interest on savings

When banks collect deposits, they pay interest for the savings. Similarly, when banks give loans, they collect interest from the borrowers. The primary source of income for banks is the difference between the interest charged from the borrowers and the interest paid to the depositors. Banks usually collect higher interest from loans than the interest they provide for deposits.