Answer: The Correct answer is Deposits
- The main source of income for the banks is the difference between what is charged from borrowers (through loans) and what is paid to depositors.
- For various economic activities and other reasons, there is a huge demand for loans.
- Hence to meet the loan requirements of people, banks make use of its deposits.
- Major part of the deposits available with the banks are given as loans.
- 15% of the deposits are held as cash by the banks in India.
- Only a small proportion of deposits received by banks are kept as cash with themselves.
- Depositors who might come to withdraw money from the bank on any given day, these deposits are given by the bank to pay them.
- The bank is able to manage with this cash, even when they have a large number of depositors, since only some depositors may come to withdraw the cash.
- Banks mediate between those who need money (borrowers) and those who have surplus money (depositors).