Personal Banking and How Banks Play An Important Role In Economy?

Personal banking offers a lot of products and they number of services. San Francisco Banking includes Current and saving accounts, Loans, Mortgages, Deposit box, money orders, demand and bank drafts, travelers check etc. This list is growing at a fast pace and many new services have been included in this.

Personal Banking and How Banks Play An Important Role In Economy?

Reserves and Deposits

In the year banks have a deposit of around $7 trillion. These deposits are made in order to improve the economic growth of the country. When we deposit money in a bank, the bank keeps some money in reserve and for the rest of the money they distribute the loan. The money they keep in reserve is utilized by counter payments, ATM machines Check withdrawal etc.

How Bank Earns Money?

Bank uses our money in order to earn. For example we deposit $10000 in our bank account. The bank keeps 3% of that money that means $300 and it gives the rest amount on loan which means a loan of $9700. Now the person who took loan purchases the thing and money come back to bank again. Then again bank keeps 3% of it and gives the rest amount as loan which is $9409. So this process continues and bank earns over $300,000 over your $10000 deposit.

So you can understand how much profit bank earns with every deposit we make and what we get in return? We get a mere 5 to 6% of the deposit we do in a year which means $500 – $600. Using this money bank develops itself and share salary among the employees. This example just shows the profit a bank earns on only $10000.

Bank Run

The bank run is the same thing as we explained above. In bank run, the depositors withdraw their money without any intention to deposit anywhere. In 1819, people find that their money is not in safe hands so they started withdrawing the money and they didn’t deposited that money anywhere. When this happens in large amount bank started facing difficulty and then the banks started calling people to clear up their loans as soon as possible which didn’t happened and banks got bankrupt. Sometime these things can go more severe and as a result the country face economic problem.

So this the reason why banks are considered as the best way to improve economic condition of a country.