Consider the following statements regarding the loan activities of banks 1 Banks use all the d...........

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Consider the following statements regarding the loan activities of banks:

1. Banks use all the deposits to extend loans.

2. Banks charge a higher interest rate on loans than what they offer on deposits.

3. The difference between what is charged from borrowers and what is paid to depositors is their main source of income.

Which of the statements given above is/are correct?

1 and 2 only

2 and 3 only

1 and 3 only

all of the above

Explanation:

Book Name – Understanding Economic Development – Pg. No. 42

Banks use the major portion of the deposits to extend loans. There is a huge demand for loans for various economic activities. Banks make use of the deposits to meet the loan requirements of the people. In this way, banks mediate between those who have surplus funds (the depositors) and those who are in need of these funds (the borrowers). Banks charge a higher interest rate on loans than what they offer on deposits. The difference between what is charged from borrowers and what is paid to depositors is their main source of income.