What is the primary function of a bank?

What is the primary function of a bank?

• A. To facilitate international trade
• B. To accept deposits and provide loans
• C. To invest in stocks and bonds
• D. To provide insurance services

Answer: (B)

The primary function of a bank is to accept deposits and provide loans. This dual role is essential to the banking system and the broader economy. By accepting deposits from individuals and businesses, banks create a safe place for people to store their money. These deposits form the foundation of a bank's assets. On the lending side, banks utilize the deposits they gather to provide loans to individuals, businesses, and other entities. This process not only fulfills the immediate financial needs of borrowers but also stimulates economic growth by enabling investments in homes, education, and business expansion. The interest earned from these loans is a significant source of revenue for banks. In addition to these core functions, banks may engage in other activities such as facilitating international trade, investing in stocks and bonds, and providing insurance services. However, these activities are considered supplementary to their fundamental role in handling deposits and extending credit. Thus, the correct answer reflects the essence of a bank's operations within the financial system.

The primary function of a bank is to accept deposits and provide loans. This dual role is essential to the banking system and the broader economy. By accepting deposits from individuals and businesses, banks create a safe place for people to store their money. These deposits form the foundation of a bank's assets.

On the lending side, banks utilize the deposits they gather to provide loans to individuals, businesses, and other entities. This process not only fulfills the immediate financial needs of borrowers but also stimulates economic growth by enabling investments in homes, education, and business expansion. The interest earned from these loans is a significant source of revenue for banks.

In addition to these core functions, banks may engage in other activities such as facilitating international trade, investing in stocks and bonds, and providing insurance services. However, these activities are considered supplementary to their fundamental role in handling deposits and extending credit. Thus, the correct answer reflects the essence of a bank's operations within the financial system.