Question

Why is there a difference between interest charged and interest earned? A) Banks are non-profit institutions. B) Banks are profit-making institutions. C) Banks must pay more than they receive. D) There is no difference between interest charged and interest earned.

Answer 1

Answer:

Option (B) is correct.

Explanation:

All the banks are profit making entity and providing banking facilities to the customers. There are two types of interest concept in banking institution are as follows:

(i) Interest received: It is the interest rate that banks usually charge on the loans they are giving to the individuals, firms, businesses, government, etc.

(ii) Interest paid: It is rate of interest that banks give to the account holder of savings account, fixed account or current account.

Interest received is greater than the interest they are paying to the customers on their deposits. That's how they are making profits.

Answer 2

Its probably b, but might need to check