Assertion (A): Banks charge a higher interest rate on loans than what they offer on deposits.

Reason (R): The difference between what is charged from borrowers and what is paid to the depositors is their main source of income.

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Both (A) and (R) are true and (R) is the correct explanation of (A).

Both (A) and (R) are true but (R) is not the correct explanation of (A).

(A) is correct but (R) is wrong

(A) is wrong but (R) is correct

answer is A.

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Detailed Solution

Both (A) and (R) are true and (R) is the correct explanation of (A).
The banks take deposits from the people and pay them interest on it. They keep some of these deposits with them and loan out the others as there is a high demand for loans. They charge higher interest rates on these loans than what they pay the depositors.
Banks earn their working capital and profit from this difference in interest rate. They use this for working for the bank and the remaining is the profit earned by them.

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