Q. 274.5( 2 Votes )

How are deposits

Answer :

Deposits with banks are beneficial for both individual and nation:

1. People can deposit money with banks after opening a bank account. This ensures the safety of the money and they also earn an interest from the bank.

2. Demand deposits can be withdrawn whenever the person wants. It also allows payments to be made through cheque.

3. Through cheques, the money gets directly transferred between banks. So no direct payment of cash needs to be made as the deposit itself is money in the modern economy.

4. Banks extend loans from the deposits they receive so they mediate between people having surplus fund and people in need of more funds through these deposits.

5. For example, If Person A has deposited money in a bank, he earns an interest. When required, A can also pay through a cheque to Person B. Person A can also avail loan at an interest rate lesser than what is in the informal sector.

Explanation: Deposits with banks enables many facilities like cheques, credit cards, loans etc. Since it is also white money, the nation’s economy is more transparent.

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