The major source of revenue for ____ is the difference between interest charged by borrowers and interest paid to depositors.

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The major source of revenue for commercial banks is the difference between interest charged by borrowers and interest paid to depositors. There is a mechanism through which banks earn a profit. Banks are obligated to keep a certain percentage of total deposits as reserves. It is free to lend out the rest to borrowers. There is a huge demand for loans for several reasons. Thus, banks act as mediators between the depositors, those who have a surplus, and the borrowers, those who need funds. A higher rate of interest is charged to borrowers as compared to the rate of interest it offers to depositors. The difference between the two interest rates forms earnings for the banks. This is the way banks earn profit.

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