Question
Download Solution PDFWhat do banks utilize a major portion of the deposits for?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is Loans.
- Loans refer to money lent to a borrower for short-term, long-term, or for an unspecified period (a working capital facility which is renewed every year). Banks utilize a major portion of deposits for loans.
- Loan carries a specific rate of interest as agreed between the lender and the borrower and the terms of the agreement.
- A loan may be for a general-purpose (say working capital) or a specific purpose (equipment loan, export packing credit, car loan etc.
Additional Information
Term | Meaning |
Guarantee |
A guarantee means giving something as security. A bank guarantee is when a bank offers surety and guarantees for different business obligations on behalf of their customers within certain regulations. |
Interest | Interest, in finance and economics, is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. |
Collaterals | In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan. |
Last updated on Jun 30, 2025
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