Loan activities of banks:

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Banks keep only a small proportion of deposits as cash with themselves.

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

Banks do not use a major portion of the deposits to meet the loan requirements of the people.

Both 1 and 2

answer is D.

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Detailed Solution

Banks keep only a small proportion of deposits as cash themselves and charge a higher interest rate on loans than they offer on deposits. These are the loan activity of the bank.
The loan activities of banks are:
1)      Banks keep only a small portion of deposits as cash on hand. This is saved as a reserve to compensate depositors who might visit the bank to withdraw money at any time.
2)      The bank can function with this cash since only a small portion of its numerous depositors visit to withdraw money on any given day.
3)      Banks use the majority of the deposits to make loans. Loans are in great demand for a variety of economic activities.

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