Just like any other commercial institutions, banks cater to products or services that are required by the public which in the case of banks is money. Money or currencies are sold by banks by way of loans, CDs (Certificate of Deposits) and other similar financial service. Profits made by banking institutions are referred to as interests which are made through the charges added on loans (these interests are higher than the interests they pay out to depositors) and other banking products.
Rate of interest imposed by banking institutions to its borrowers depend largely on the number of people borrowing and the amount that is being loaned. Banks are basically taking a risk when lending money because there is always the danger of not recovering the investment so in order to offset this; they usually give higher interest rates to high risk groups. Banking fees although generating smaller income than interest rates are also another way for banks to generate income.
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