Final answer:
Imprest accounts typically maintain a fixed balance and are replenished as needed; they do not carry significant excess funds which would otherwise limit a bank's ability to loan and earn interest.
Step-by-step explanation:
Imprest accounts usually do not carry a significant balance. An imprest account is typically a financial account maintained with a fixed amount of funds, which is replenished periodically to the original level after expenditures. The classic example is a petty cash system. The balance in an imprest account does not significantly fluctuate since it is designed to hold only enough to cover minor, routine expenses within a business or organization. Any variation is usually replenished or accounted for after a specific period.
Understanding how banks make money also contributes to this explanation. Banks operate on the principle of issuing loans and collecting interest, meaning the funds they hold are often at work through lending activities, rather than sitting idle. They maintain minimum balances to handle withdrawals and immediate transactional needs, but any excess is typically lent out to maximize earnings through interest.
To apply this to imprest accounts, since they are maintained with a constant balance, they are not a source of loanable funds that can earn interest. They are kept at a level enough to manage small, unforeseen expenses, not to carry surplus capital that could limit a bank's earning capacity.