What do banks do with "Repaid Principal"? When a bank receives payments towards repayment of the principal of a loan, it is called "Repaid Principal". What does a bank do with this amount?

Does "Repaid Principal" add up to their pool of funds or reserves which they lend again in form of new loans, or do they utilize it in some other ways?

Where exactly does the "Repaid Principal" end up?
When you repay principal of 90 USD, the bank makes two accounting entries in its computerized books.

One is called a debit and it goes like this.  If you pay by check drawn on another bank, their reserves at the Fed are increased by 90 USD. If you paid in currency, their vault cash asset account, which is also an asset of the bank, increases by 90 USD and the cash is dumped into the vault with all the other cash.  If you pay out of your checking account at the same bank, their "deposits" book entry, which is a liability of the bank, is decreased by 90 USD.

The other entry is called a credit.  Your loan balance, which is an asset to the bank, is decreased by the 90 USD.

You asked what they do with "it", meaning the principal paid.  As you can see above, when the currency was dumped into the vault and mixed with all the other dollar bills, or a computerized balance was increased or decreased by 90 USD, "it" ceased to exist.  The 90 USD are no longer distinguishable from any other dollars.  So it is a meaningless question. A lot of people don't understand this!

But if you are asking what the bank does with its reserves (vault cash plus reserve account at the Fed), in general: in normal times, they keep them as low as allowed by the Fed.  As their reserves increase higher than required, they reduce them by lending money to customers and other banks, purchasing securities, or paying their expenses.  Transactions that make their reserves increase are things like (a) loan principal is repaid, (b) currency or checks drawn on other banks is deposited, (c) paying their expenses, (d) loan interest is paid by their debtors.

At present, banks are holding on to more than they are required to, because they are relatively afraid to lend.  The extra is called "excess reserves".