Why do banks give interest on deposit?
Banks make money by lending money to people and charging people
for borrowing. The amount banks charge is called interest. Banks
borrow money from other people and pay them interest on the amount
borrowed. Banks charge more interest on the money they lend than
they pay one the money they borrow. That is how they make money.
When people deposit money with a bank, the bank is literally
borrowing money from some people so they can lend it to other
people. That is why banks pay interest.
