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

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Detailed Solution

Banks charge a higher interest rate on loans than what they offer on deposits
This is the primary income of the banks. The other sources of payment of the banks are
1)      Interest on bank loans: Banks provide many loans and advances to industries or individuals. They charge high interest from the loan borrowers and give less interest to the depositors. The difference between these two interest rates is their primary source of income.
2)      Investment interest: Banks invest in various government and rated securities and earn interest and dividends from these investments.
3)      Fees income: Banks accept bills of exchange, provide safety vaults, etc., on which they charge fees.
4)      Forex operations: Banks earn from the processes like foreign exchange and act as brokers.
5)      Commission on third-party products: Income from the mutual funds, distributing insurance to customers.

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