ICSE Class 10 Answered

1) There is a huge demand for loans for various economic activities. Banks make use of the deposits to meet the loan requirements of the people.In this way, banks mediate between those who have surplus funds (depositors) and those who are in need of these funds (borrowers).Banks charge a higher rate of interest on loans than what they offer on deposits.The difference between what is charged from borrowers and what is paid to depositors is their main source of income.