Asha works in an office and saves 20% of her income every month. This income will not give her any returns sitting in her house. So, she gives it to the bank. The bank promises to pay her 4% interest per year.
Bijoy runs a business and needs some money to make the business grow. So, he comes to the bank and asks for a loan. The bank says, “Sure. But you will have to give me 12% interest per year. And to make sure that you do return my money, I will keep something of yours that is worth more than this. That will give me security that you will not run away with the money.” Bijoy agrees. The bank gives the loan.
If you notice, the bank is only paying Asha 4% for her money but is making 12% on it. The extra 8% is the earning of the bank. In short, a bank is a trader in money.
Short date-wise summary of events In the middle of the week (8th March or thereabouts), a rating agency called Moody's called up Silicon Valley Bank (SVB) - a 40-year old bank that specialised in start-ups and Venture Capital funding, and informed them that they are going to downgrade their rating.…
Sheetal earns 2000 rs per month. She is not able to save a lot. But Priya, her neighbour, convinces her to save 5 rs per month. This much she can do. So, she starts saving 5 rs per month. Every month, a didi comes to her house, takes her 5…
Bal Gopal means Little Krishna. The Bal Gopal Bank in Gujarat is a microfinance initiative for children. Let us understand with an example. Shanta pays 110 rs to become a member. Her membership kit has a piggy bank which she uses to save her savings in the month. This could…
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