The facility of cheques against demand deposits make it possible to directly settle payments without the use of cash. Since demand deposits are accepted widely as a means of payments, along with the currency, they constitute money in the modern economy.
The facility of cheques against demand deposits make it possible to directly settle payments without the use of cash. Since demand deposits are accepted widely as a means of payments, along with the currency, they constitute money in the modern economy.
(i) People hold money as deposits with banks which pay an interest rate on them. (ii) People do not withdraw the cash daily. (iii) The banks, therefore, hold only 15 per cent of their deposits as cash with themselves in order to pay the depositors who might come to withdraw money from the banks onRead more
(i) People hold money as deposits with banks which pay an interest rate on them.
(ii) People do not withdraw the cash daily.
(iii) The banks, therefore, hold only 15 per cent of their deposits as cash with themselves in order to pay the depositors who might come to withdraw money from the banks on any given day.
(iv) Since, on any particular day, only some of its many depositors come to withdraw cash, the bank is able to manage with this cash.
(v) They use major portion of the deposits to extend loans to those who need money.
(vi) The banks make use of the deposits to meet the loans requirements of people.
(vii) Thus, in this way, the banks mediate between those who have surplus money and those who need money. Banks charge a higher interest rate on loans than what they offer on deposits. The difference between the two is the main source of income of the banks.
Why no person can refuse to accept payments in rupee?
No one can refuse to accept payments in rupee because it is a legal currency authorised by the government.
No one can refuse to accept payments in rupee because it is a legal currency authorised by the government.
See lessHow do the demand deposits share the essential features of money?
The facility of cheques against demand deposits make it possible to directly settle payments without the use of cash. Since demand deposits are accepted widely as a means of payments, along with the currency, they constitute money in the modern economy.
The facility of cheques against demand deposits make it possible to directly settle payments without the use of cash. Since demand deposits are accepted widely as a means of payments, along with the currency, they constitute money in the modern economy.
See lessWhat is a cheque?
A cheque is a paper instructing the bank to pay a specific amount from the persons's account to person in whose name the cheque has been made.
A cheque is a paper instructing the bank to pay a specific amount from the persons’s account to person in whose name the cheque has been made.
See lessHow much amount of the deposits is kept as cash by the banks and why?
Deposits with the banks are called demand deposits because they can be withdrawn on demands.
Deposits with the banks are called demand deposits because they can be withdrawn on demands.
See lessWhy do people deposit money with the bank?
People deposits surplus money with the banks because in this way their money is safe and it earns an interest too.
People deposits surplus money with the banks because in this way their money is safe and it earns an interest too.
See lessWhich authority issues currency notes in India?
In India, Reserve Bank of India issues currency notes on behalf of the central government.
In India, Reserve Bank of India issues currency notes on behalf of the central government.
See lessWhy is currency accepted as a medium of exchange?
Because it is unauthorised by the government of country e.g. Indian Government.
Because it is unauthorised by the government of country e.g. Indian Government.
See lessWhat is the basic feature of double coincidence of wants? In which system is it practiced?
Basic feature is that both parties agree to sell and buy each other's commodities. It is practiced in Barter system.
Basic feature is that both parties agree to sell and buy each other’s commodities. It is practiced in Barter system.
See lessWhy are transactional made in money?
Transaction are made in money because a person holding money can easily exchange it for any commodity or services that he as she might want.
Transaction are made in money because a person holding money can easily exchange it for any commodity or services that he as she might want.
See lessHow do banks mediate between those who have surplus money and those who need money?
(i) People hold money as deposits with banks which pay an interest rate on them. (ii) People do not withdraw the cash daily. (iii) The banks, therefore, hold only 15 per cent of their deposits as cash with themselves in order to pay the depositors who might come to withdraw money from the banks onRead more
(i) People hold money as deposits with banks which pay an interest rate on them.
(ii) People do not withdraw the cash daily.
(iii) The banks, therefore, hold only 15 per cent of their deposits as cash with themselves in order to pay the depositors who might come to withdraw money from the banks on any given day.
(iv) Since, on any particular day, only some of its many depositors come to withdraw cash, the bank is able to manage with this cash.
(v) They use major portion of the deposits to extend loans to those who need money.
(vi) The banks make use of the deposits to meet the loans requirements of people.
(vii) Thus, in this way, the banks mediate between those who have surplus money and those who need money. Banks charge a higher interest rate on loans than what they offer on deposits. The difference between the two is the main source of income of the banks.
See less