What are ‘demand deposits’?
Answer:
- Workers who receive their salaries at the end of each month have extra cash at the beginning of the month.
- This extra cash is deposited with the bank by opening a bank account in their name.
- Banks accept the deposits and also pay an interest rate on the deposits.
- In this way, people’s money is safe with the banks and it earns an interest as well.
- People also have the provision to withdraw the money as and when they require.
- Since the deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits.