2. Banks are the financial institution which accepts the
deposits and lend loans to those who demand.
The various activities that are conducted by banks are
called banking.
Majority of the private sector banks were having no
scope towards the rural development
And since the banking system is the backbone of an
economy, commercial banks came into existence
3. 1. Capital formation
2. Creation of money
3. Strengthen the link between organized and
unorganized sector
4. Provision of long term loans
5. Helping agriculture and small scale industries
6. Entrepreneurial development
7. Medium of exchange
8. Regulation / flow of national savings
9. Comprehensive infrastructural
Role :
4. 9. Maintaining of balance of trade
10. Mitigation of trade cycle
11. Sectorial priorities
12. Catalyst in social change
14. effective implementation of monetory policies
15. Industrial development
16. Increase employment
17. Increase savings
18. Increase production
5. Capital Formation : As banks accepts savings from
general public and make them available for productive
purpose, the money is easily circulated.
Creation of money : Commercial banks are known as
factories of credit since most of the loans are provided
by them to needy people at attractive rate of interest.
Explanation :
6. Strengthen the link between organized and
unorganized sector : Indian money market consists of
organized and unorganized sectors and commercial
banks acts as bridge btw them for smooth conduction
of activities which ensures economic stability.
Provision for all term loans : All type of loans are made
easily available for those who require for efficient and
productive purpose.
7. Helping agriculture and small scale industries : They
have to offer best service to these sectors as Agriculture
contributes around 22% to the GDP and small scale
industries provide employment opportunities.
Development of entrepreneurs :
Banks provide initial encouragement
and strengthens the youths for undertaking
entrepreneurial activities.
8. Industrial development : Banks provide funds to
industrial people for development purpose and also
these industry develop employment opportunity.
Regulation / flow of national savings : Bank regulates
and diversifies the flow of cash into various productive
channels.
9. Mitigation of effects of trade cycle : Banks eradicate the
negative effects of trade cycle caused due to inflation or
deflation by controlling money supply.
Sectorial priorities : Banks provide a specified portion
of the bank lendings, to small enterprises, to few
specific sectors like agriculture, industry etc.
10. Effective implementation of monetory policy :
Monetory policies has to be organized systematically
and has to be planned taking into consideration the
policies and programs of the govt.
Catalyst in social change : Banks acts a s a catalyst in
bringing social changes through its sectorial priorities.
Granting loans to specific weaker sections namely Sc &
St, small traders, labourers etc
11. Balance of trade : Exports , Imports & timely payment
facility, credit facility etc have helped to maintain
balance the trade.
Medium of exchange : Cheque, bills of exchange,
demand drafts etc makes the business transactions
carry on easily and give scope to import and export.
12. Increase in savings, production, and employment : It
encourages Savings. Industries provides or offers
employment opportunity for more (mass) production
activities.
