Deposit banks volition hold liquidity. They must bring plenty cash reserves to run into withdrawals. Since deposits are of short-term nature, loans together with advances volition likewise last for curt periods. The trouble organisation is less risky equally deposits are non locked upwardly inwards long-term loans. Since loans are repaid inwards curt period, the funds are recycled over. i.e, lent 1 time to a greater extent than together with again.
A real of import argue for supporting deposit banking is, the theatre belief that banks are non alone custodian but likewise trustees for the vast bulk of depositors who bring entrusted their hard-earned coin amongst banks for prophylactic custody. A slap-up proportion of this coin is payable on necessitate together with this fact is never forgotten yesteryear banks. Naturally, they hold a considerably percent of their assets inwards the kind out of cash of high liquid assets to run into withdrawals yesteryear the depositors.
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