Read the following case and answer the question that follows:

There is an interesting mechanism at work here. Banks keep only a small proportion of their deposits as cash with themselves. For example, banks in India these days hold about 15 percent of their deposits as cash.

[[1]] is the function of the bank that is highlighted here.

see full answer

Your Exam Success, Personally Taken Care Of

1:1 expert mentors customize learning to your strength and weaknesses – so you score higher in school , IIT JEE and NEET entrance exams.

An Intiative by Sri Chaitanya

(Unlock A.I Detailed Solution for FREE)

Best Courses for You

JEE

NEET

Foundation JEE

Foundation NEET

CBSE

Detailed Solution

Loan is the function of the bank that is highlighted here.
Banks keep a small proportion of their deposits as cash with themselves. They only hold about 15% of their deposits as cash these days. They make loans for other deposits to traders, small-scale industries, small cultivators, small borrowers, profitable businesses, and wealthy landlords. The RBI controls banks, and periodically they have to submit a report to keep a check on the flow of credit. The RBI also determines the rate of interest to provide cheap and affordable loans to people. There is no exploitation in this sector.

Watch 3-min video & get full concept clarity