What do banks utilize a major portion of the deposits for?

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SSC GD Previous Paper 18 (Held On: 19 Feb 2019 Shift 1)_English
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  1. Loans
  2. Guarantee
  3. Interest
  4. Collaterals

Answer (Detailed Solution Below)

Option 1 : Loans
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The 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.
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