How do banks mediate between those who have surplus money and those who need money?
Dear student,
Banks mediate between those who have surplus money and those who need money in the following ways:
a. Banks keep a minor portion of the deposit as cash.
b. The major portion of the deposit is utilised for extending loans.
c. Banks maintain a balance by accepting deposits and advancing loans and mediate between those who have surplus funds and those who are in need of these funds.
d. Banks also charge a higher rate of interest on loans compared to the one they offer on deposits.
Regards.