Choose the given statement is True/False

Banks charge lower interest rates on loans than the interest rate they offer on deposits.

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True

False

answer is B.

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Detailed Solution

The given statement is false.
Banks charge higher interest rates from the borrower, and banks give less interest on the amount being deposited by the account holder. The primary source of income is the gap between what banks charge borrowers (via loans) and what they pay depositors. There is a significant demand for loans due to numerous economic activities and other factors. Therefore, banks use their deposits to fund customer loan requests. A large portion of bank deposits is disbursed in the form of loans. The banks in India hold 15% of the cash deposits. Banks only keep a small part of the deposits they receive in cash on hand. Depositors who could visit the bank to withdraw money on any given day are paid out of their deposits by the bank.
The correct statement is that banks charge higher interest rates on loans than the interest rate they offer on deposits.

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