Read the following statements and choose the correct option.

Assertion (A): The interest rate on loans is higher than a bank's interest rate on deposits.

Reason (R): The bank earns profit out of this margin.

Both A and R are true, and R is the correct explanation of A.

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Both A and R are true, but R is not the correct explanation of A.

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A is true, but R is false.

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A is false, but R is true.

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Solution

The correct option is A Both A and R are true, and R is the correct explanation of A.
People make deposits in banks to safeguard their money. Banks use the deposited money to lend loans for various purposes. The banks, in turn, pay their customers with interest money. However, the interest rate/money on loans that banks lend to external sources is higher than the interest rate/money they pay their customers. The difference is the margin/profit banks make to run their businesses.

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Similar questions

The rate of interest offered on public deposits is usually higher than that offered on bank deposits.

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Statement: An advertisement by Bank X ‘Our interest rates for education loans are lower than any other bank’.

Assumptions:

I. Some other banks also provide education loans.

II. Interest rates charged on education loans are different for different banks.

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