Question

What would happen if banks stored all the deposits without lending?

• A. People will be free from the trouble of paying interests.
• B. The banks will use the deposits as a profit.
• C. The banks will not be able to make profit from the deposits.
• D. People will not have money for production activities.

Answer 1

Answer: (C), (D)

People will not have money for production activities.

Banks lend deposits as loans. These loans help people in taking up production activities. Increase in production translates into the development of the country. Additionally, banks make profits by giving loans, a part of which they provide as interest on deposits. If banks do not lend, they will not be able to profit from deposits. Thus, they will not be able to provide interest on deposits.