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Single Answer MCQ
Q-00045474

How do banks typically make a profit from loans?

1

Charging lower interest on deposits

2

Investing depositors' money in stocks

3

Collecting higher interest on loans than paid on deposits

4

Making loans only to large corporations

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Sandeep Chaturvedi

Sandeep Chaturvedi

CBSE Social Science & Humanities Reviewer

Social science and humanities educator with 14+ years of experience reviewing CBSE SST, economics, commerce, arts, and vocational content.

M.A. HistoryM.A. Political ScienceB.Ed.

Answer and Solution

Answer

C. Collecting higher interest on loans than paid on deposits

Solution:

Banks earn profits by charging borrowers a higher interest rate on loans compared to the interest they pay on deposits. This difference represents their main income source.

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