How do banks earn money?

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By giving out loans

By taking fees for the services

Both 1and 2

None of the above.

answer is C.

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Detailed Solution

Banks earn money by providing loans as well as by taking fees for their services.
The minor portion of the deposits is kept by the banks in case of immediate liquidity or emergency, and the major portion is used to give out loans. Those who need money take loans from the bank and pay interest on those loans. The interest received by the depositors is less than the one paid by the borrowers, allowing these banks to earn money. The depositors also get extra money on top of their deposits, making everyone better off. The banks provide a lot of services to the people who have accounts with them; they charge fees for the services that are used by the members. They also charge fines in case of faulty transactions.

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