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If banks lend the money they receive as deposits how can you be sure that you will be able to withdraw all your money when you want?
Wiki User
∙ 14y ago
The answer to your question is very simple. Banks do not lend ANY of the money you have deposited out to ANYONE. When a bank makes a loan it is done like this. Lets say you walk into the bank and want to buy a car. You ask the bank to "loan" you $10,000. The bank goes to your account and with a bookkeeping entry puts $10,000 into your account. They just create the money out of THIN AIR. Now there are rules that govern how much money a bank can loan. The system used in the united States is known as a fractional reserve banking system. Now under that system if a bank has a deposit made of lets say $10,000 they can then loan out $9,000 of the $10,000 they received in deposits. However they don't actually loan any of the original $10,000 out, they just make a bookkeeping entry in their computers to your account for $9,000 and then charge you interest on that loan. So now out of thin air they have they have upped the amount from $10,000 to $19,000. The Federal Reserve system is first a PRIVATE bank there is nothing federal about it. Second the fractional reserve system we operate on is 10%. In the above example you will note that with the total amount created being $9,000 they now with the original $10,000 only have to keep $1,900 in reserve. So basically from the original amount deposited of $10,000 they could theoretically "loan" out $100,000. Here is a link to a document from the federal reserve that will explain it better.
http:/www.rayservers.com/images/ModernMoneyMechanics.pdf
Wiki User
∙ 14y ago
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Do banks uaually offer bank cds?
Yes, most banks do offer CD's or, Certificates of Deposits. Generally Certificates of Deposits are time deposits, a certain denomination of money that you take a deposit on and that accrues interest until it is 'mature' at which time you can usually extend it, or withdraw it with the interest added. You can usually withdraw your money early but if you do, you will forfeit all or much of your interest.
What is it called to take money out of the bank?
In most banks, this is called a withdraw.
What are the risks for a bank?
The two main risks for banks are:Liquidity Risk - The risk that all customers who have deposits with the bank want to withdraw their deposits at the same time. No bank on earth can survive such a calamityCredit Risk - The risk that customers who borrowed money from the bank would default on the repayments and not pay the money they owe the bank.
Is it possible to withdraw money from passbooks in any BPI banks now?
You can't withdraw money from any BPI branch... You can only withdraw from the BPI branch where you opened your Passbook account.
Do banks lend all the money they receive as desposits?
no,generally banks keep 7.5% of total deposits with rbi as repo rate ,24%as slr and 40% in primary sector and the res amount in day to day transaction.
Do banks uaually offer bank cds?
Yes, most banks do offer CD's or, Certificates of Deposits. Generally Certificates of Deposits are time deposits, a certain denomination of money that you take a deposit on and that accrues interest until it is 'mature' at which time you can usually extend it, or withdraw it with the interest added. You can usually withdraw your money early but if you do, you will forfeit all or much of your interest.
What is deposits in banks?
When you put money in.
CASA Ratio in banking?
CASA ratio is the ratio of the deposits in the form of Current Account & Savings Account to the total deposits.. it should be higher for a bank because interest paid on savings account is very low and no interest is paid on current account deposits. In this way, the banks get money at low cost..How is CASA different from term and demand deposits?Current and saving accounts remain operational. Depositors don't need to give prior notice to withdraw money, however, in case of term deposits, the money is locked in for a specific period. If a depositor wishes to withdraw the money before maturity, he may have to pay a fine. Usually, an overdraft facility is available with the current account deposit. Demand deposit gives you the facility to withdraw your money anytime.
Can you withdraw money anytime from your reccuring account?
No. Recurring Deposits have a maturity date and you can withdraw the money only after the deposit matures. If you want to withdraw the money before maturity date, the bank will charge you a penalty for doing so.
What is it called to take money out of the bank?
In most banks, this is called a withdraw.
Is it possible to withdraw money from passbooks in any BPI banks now?
You can't withdraw money from any BPI branch... You can only withdraw from the BPI branch where you opened your Passbook account.
What are the risks for a bank?
The two main risks for banks are:Liquidity Risk - The risk that all customers who have deposits with the bank want to withdraw their deposits at the same time. No bank on earth can survive such a calamityCredit Risk - The risk that customers who borrowed money from the bank would default on the repayments and not pay the money they owe the bank.
What is a banking service in which a customer deposits money and writes checks to withdraw at his or her convience?
A checking account
Do banks lend all the money they receive as desposits?
no,generally banks keep 7.5% of total deposits with rbi as repo rate ,24%as slr and 40% in primary sector and the res amount in day to day transaction.
Did the Great Depression lead to people losing their bank accounts?
Yes the banks gave people's money in loans to others who couldn't pay them off. During a banking panic when several went to withdraw their deposits the money was lost in loans to other people.
What type of bank account that allows you to make deposits write checks and withdraw money is?
A checking account.
How do banks make money when it pays interest on deposits?
They charge a much higher interest on loans than they pay on deposits.
