According to NCERT, why do people deposit their money with banks?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Banks pay some interest, and a bank may be safer than home.
People keep money in banks because banks pay some interest on deposits. It may also be safer than keeping money at home.
Option (1) Banks keep the whole of every deposit as cash reserves. — Incorrect. Banks keep only a part as reserves and lend the rest.
Option (2) Banks pay some interest, and a bank may be safer than home. — Correct. These are the two reasons people deposit money.
Option (3) Deposits with banks are legal tender, unlike currency notes. — Incorrect. It is the other way: notes are legal tender, deposits are not.
Option (4) Banks guarantee that deposits will be returned with a fixed capital gain. — Incorrect. A capital gain comes from a rise in bond prices. Banks pay interest on deposits.
NCERT (2026-27): “… Commercial banks mediate between individuals or firms with excess funds and lend to those who need funds. People with excess funds can keep their funds in the form of deposits in banks and those who need funds, borrow funds in form of home loans, crop loans, etc. People prefer to keep money in banks because banks offer to pay some interest on any deposits made. Also, it may be safer to keep excess funds in a bank, rather than at home, just as people in the example above preferred to keep their gold with Lala instead of keeping at home. … So the bank will typically retain a portion of the funds to repay depositors whenever they demand their funds back, and loan the rest.” |