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Why cant all depositors in a bank withdraw all of their money at once?
Such a thing is known as a run on the bank. When account holders pay in money, that money is not just simply put into the bank's safe, and is always there to be instantly taken out again. The money is lent out, and is expected to increase in value due to interest paid in by the borrower. Though, while on paper, the money is there, in fact it has been lent on to someone else.
Where does your money get put when you put it in the bank?
It depends on the type of account. In case of Deposit accounts (CD's, FD's) - A small portion of the money gets stored in the banks safe deposit vaults and the rest is lent out to other customers as loans In case of Checking/Current accounts - All the money remains in the bank's safes because they are as good as liquid cash and the bank doesn't lend it out to anyone
Does The Bank of Montreal offer unsecured loans?
No the The Bank of Montreal does not offer unsecured loans. No banks offers unsecured loans then that won't have anyway of knowing if they lent you money.
What is the loan to deposit ratio of the bank?
The loan to deposit ratio of a bank is a measure of how much money the bank has lent out compared to how much it has in deposits. It is calculated by dividing the total loans by the total deposits. A higher ratio indicates that the bank is lending out more money relative to its deposits.
How you can reduce npa?
NPA stands for Non-Performing Asset. It is something that the bank owns but isn't giving or generating any income to the bank. Usually defaulted loans are considered NPA's. cases where the customer has defaulted on the loan means that the bank isn't going to get the money they lent him. Banks can reduce NPA by being more diligent while disbursing loans and avoiding exposure to high risk customers.
What are the advantages of saving money in the bank?
There are numerous advantages of saving money in a bank for both the person saving the money and others. a. The money you save earns you interest income b. The money you save is lent out as loans to help out others c. The money you save can be withdrawn at any point in future to help you with your financial needs.
What are general entry of loan in banks?
In banking, the general entry for a loan involves recording the transaction in the bank's accounting system. When a loan is issued, the bank debits the Loan Receivable account (an asset) and credits the Cash or Bank account (also an asset) to reflect the disbursement of funds. This entry captures the amount lent to the borrower, establishing the bank's right to receive repayment in the future. Additionally, when repayments are made, the bank would reverse this entry, reflecting the decrease in the loan receivable and an increase in cash.
What does a corporate loan mean?
A corporate loan is when a company lends money from a bank. Because a loan is given to a corporate institution, the money tends to be a larger amount than if it was lent to an individual.
What are the terms of formal and informal sources of credit?
Formal source is a Bank loan, Credit Cards. Informal Source - Cash money lent out by Gangsters .
What do you do if you lent your employer money and you were laid off?
If you lent your employer money and were laid off, you ask your employer for your money back! If you do not get it back you sue him in a court of law.
Why is the bank willing to protect your money for free or for a low cost?
Because your money isn't actually IN the bank; the bank lent your money out to somebody else. It's called "fractional reserve banking". A hundred people deposit money in the bank, and the bank promises to pay interest on the money. Then the bank LOANS OUT some (actually, most!) of the money to start businesses or buy houses. The borrower pays more interest to the bank than the bank pays to you, so as long as the loans are good and people pay their mortgages on time, everything is fine. The problem comes when two things both happen around the same time; people can't make their mortgage payments, AND the people who had deposited money in the bank start to get nervous and want their money back. When lots of people all want their money back at the same time, it's called a "run on the bank", and the bank won't be able to give the depositors their money - because the money was lent out to businesses that are failing, or for homes where the people can't pay their mortgages. The U.S. government sponsors "deposit insurance" so that the depositors don't have to worry that they won't be able to get their money back. And since there's no worry (or not much!) there are few "runs on the bank" these days.
Why is people so important to banks?
People are the banks source of income. Basically people deposit their money into the bank and then the bank uses it. To make money, the banks then lend what they have to people so that they can buy a house (home lone). The people using the lent money must repay it over a period of time with addition to an interest payment. Therefore they end up paying back more than the lent in the first place, so the banks make money. So the banks need people.
