Question 30 (Choice 1) - Practice Questions CBSE - Social Science Class 10 (2023 Boards) - Solutions to CBSE Sample Paper - Social Science Class 10 - Social Science Class 10

'Business is all about solving people's problems - at a profit.'

Explain how banks function like a business with respect to the above statement.

Answer:

Points to Remember

Banks solve the financial problem of the people in exchange for profit.

1. Banks keep only a small proportion of their deposits as cash with themselves. 
2. Bank to extend loans to the public.
3. Banks act as a mediator between those who have surplus funds and those who need these funds
4.  Banks charge a higher interest rate on loans. 
5. The interest is their profit . (Bank’s main source of income).

Answer to be written in exam

Banks solve the financial problem of the people in exchange for profit.

1. Banks keep only a small proportion of their deposits as cash with themselves. This is kept as a provision to pay the depositors who might come to withdraw money from the bank on any given day.
2. The r est of the deposits are used by the bank to extend loans to the public.
3. In this way , banks mediate between those who have surplus funds and those who need these funds , hence solving a problem.
4. Banks charge a higher interest rate on loans than what they offer on deposits. 
5. The difference between what is charged from borrowers and what is paid to depositors is the banks' main source of income. This interest is their profit .