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A commercial bank's 'spread' is the difference between the interest it
Acharges borrowers and pays the RBI
Bearns on bonds and pays in tax
Ccharges borrowers and pays depositors
Dpays the RBI and pays depositors
Answer & Solution
Correct answer: C. charges borrowers and pays depositors
1. Banks pay interest to attract deposits.
2. Banks charge a higher rate on the loans they make.
3. The gap between the two is the **spread**, and it is the bank's profit.
4. The comparison is between borrowers and depositors, not between a bank and the regulator.
_Source: NCERT Class 12 Introductory Macroeconomics, Ch 3 "Money and Banking", section 3.2 DEMAND FOR MONEY AND SUPPLY OF MONEY_
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