Question

Major portion of the deposits is used by banks for. Commerce - Q&A

• A. setting up new branches
• B. paying taxes
• C. paying interest on loans
• D. extending loans

Answer 1

The correct option is D

extending loans

Banks act as a mediator between those who have surplus funds (the depositors) and those who are in need of funds (the borrowers) by lending money to people who are in need. People can open accounts in banks and banks make use of that money to fulfil the loan requirements of the needy people. A higher rate of interest is charged for the borrower and that profit is given to the depositor as interest for offering deposits. This is the actual loan process.

Banks use the majority portion of the deposits to extend loans. Therefore, the correct answer is option (d)