Role of Bank in the Economy of India
The role of banks in the economy of India can be categorized as follows:
Removing the deficiency of Capital Formation
The banks provide loans to the investors. This helps in capital formation in an economy. In the developing economy, it helps in removing capital deficiency. The banks also convert the dormant money in the economy into active capital by giving interest to the customers.
Helps in generating Employment Opportunities
The banks give loans to start-ups and finance their expenses. This provides impetus to the generation of employment. The loan also helps in scaling up the firms. The banking sector creates lakhs of jobs every year.
Helps in implementing Monetary Policy
Since the banks are the producers of money, they are very crucial in the implementation of monetary policy. Banks by regulation of the interest rate decide the flow of liquid cash in the economy. It also helps in combating inflation.
Financial Assistance to Industries
The financial assistance rendered by the banks is very helpful to the MSMEs and other small informal businesses. It helps an economy to get through the recession.
Promote Saving Habits of the people
The banks attract the money of the public by giving lucrative interest payments. It helps in promoting saving habits among people.
Role of Banks in Economy of India
Bank plays an important role in the economic development of the country, without a sound effective banking system, no country can have a healthy economy. It is a financial institution that performs several functions like accepting deposits and lending loans. Banks play the most important role in connecting those who have capital with those who need capital.
Table of Content
- Role of Bank in the Economy of India
- Banks as Safe Custody
- Loans by Banks
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