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The banks maintain some liquidity(Raw Cash) to maintain the daily transactions. Then they invest the money depending on when they should take back. Like if you have deposited in your fixed account, they go for long term investment, and vice versa. "Handle the money to get the maximum return before customer takes it" is what contributes most of the bank profit.

In short, A portion is maintained as liquid cash and the rest of the money you deposit in a bank is lent out as loans to other customers.

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15y ago

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