Functions of Banks and Cooperatives
- Accepting Deposits: Accepting deposits is one of the fundamental features of a bank. Banks take money from people who have access to it and keep it safe.
- Loans & Advances: Loans are the main source of income for banks. Banks charge a higher rate of interest on loans and pay lower interest on deposits.
- Funds transferring help: Banks perform the function of fund Transferring from one branch to another.
- Portfolio Management: Banks help to manage the portfolio of the people by performing the activity of purchasing and selling securities.
- Utility Functions:
- Accepting cheques.
- Banks Issue letters of credit.
- Banks keep the valuables safe and secure by providing locker facilities.
- Foreign Exchange dealing can also be done through banks.
- Act as guarantor.
- Other welfare programs.
Why is it necessary that banks and cooperatives increase their lending particularly in rural areas?
Cheap loans and credit schemes are the primary sources to improve the credit situation in India. Banks should open more and more branches in rural areas as well as make rural people aware of banking, credit facilities, and cooperatives. Banks should provide loans at lower interest rates so that rural people don’t depend on informal sectors. This will protect them from scams and fraud and prevent them from getting exploited by informal sources. Cheaper loans can help rural people in many ways such as growing their businesses, trading in a variety of goods, and improving their living standards. Banks and Cooperatives can also help farmers to expand and diversify their production. Overall cheaper loans are one of the main factors in rural growth and development.