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.

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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.

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