English reader on

TEXT I 

 

The World Of Banking And Commercial Banks 

 

Banks act like 'money pumps'  

To put it simply, banks are in business to look after money that one group 

of people do not want to spend. They then lend that money to another group 

who do not have enough of their own money to spend. By offering suitable 

interest rates or other incentives, the banks can attract de-posits of money. This 

money safely in the banks is temporarily with-drawn  from circulation. The 

banks then help to pump or 'inject' that money back into circulation by lending 

it to those who want extra money to spend. 

The basic idea of banking is that a bank attracts deposits of money at 

one rate of interest and then lends the money at a higher rate of interest. 

The aim is to do this profitably.