How banks help in boosting nation's economy?

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How banks help in boosting nation's economy? 

(By Suhana Ahmed ) 

Image By:- Goutham Sagar


The development of a nation rests in the hand of the nation's economy. It is very necessary for the country to be financially stable in order to provide its citizens with a comfortable life with all their rights and basic facilities. Money helps in every way, money is a necessity. Saving up, conscious usage of it, etcetera are important, and the banks play a major role in it.


Bank  is  a  financial  institution  that plays a bunch of  functions such as accepting  deposits,  lending loans,  thus  helping in the growth of rural areas, small scale industries, large scale industries, and so many other institutes.  Bank  plays  an  important  role  in  the economic  development  of  the  country.  Without  a  firm  and  effective  banking  system,  a healthy economy is most likely a dream.  It  is  necessary  to  encourage  people  to  deposit  their surplus  funds  within  the  banks.  These  funds  are  used  for  providing  loans  to  the  industries; thereby  making  productive  investments.  The  most  important  role  of  a  bank  is  to  connect those  who  have  capital  with  those  who  need  capital. Today,  the  banking  sector  is  one  of  the  biggest  service  sectors  existing and working in  India. 


Banks  can  contribute  to  a  country’s  economic  development  in  the  following  ways-


1. In capital formation:

Economical sustainability is one of those things that need closer concentration upon. In any economy, development happens only when there is an adequate amount of capital formation. Here is where the role of banks comes in action. The serious capital deficiency in the economy is prevented by the banks as they store in the capital.


2. Employment Generation

One of the major roles banks play in our lives is providing financial aid, that is, loans. They provide financial aids to industries and start ups which anyway help in raising the employment rate.


3.Financial  assistance  to  Consumer Activities 

People  in  underdeveloped  countries,  being poor  and  having  low  incomes  do  not  have  sufficient  financial  resources  to  buy  durable consumer  goods.  Commercial  banks  advance  loans  to  them. Thus, giving them a chance at a relatively easier life.


4. Financial  facilities  for  Trade

 The  commercial  banks  help  in  financing  both  internal  and external  trade.  The  banks  provide  loans  to  retailers  and  wholesalers  to  purchase  goods which  they  deal with.  They  also  help  in  the  movement  of  goods  from  one  place  to  another.


5. Banking  Development

We can  see  a  number  of  huge (popular)  banks  like SBI, PNB, Baroda Bank, etcetera spreading  banking  operations  all  over  the  country, which  helps  to  attain  balanced regional  development  by  promoting  rural  areas and small scale developments.


6. Government  spending 

Commercial    banks  help  fund the government  spending  by purchasing  bonds  issued  by  the  Department  of  the  Treasury.  Both the  long  and the short  term treasury  bonds  help  finance  government operations,  programs  and  support  deficit  spending.


7. Helps  in  implementing  Monetary  policy

The  commercial  banks  help  the  economic development  of  a  country  by  implementing  the  monetary  policy  of  the  RBI.


8. Promote  saving  Habits  of  the  people

Banks  attract  depositors  by  introducing  attractive deposit  schemes  and  providing  higher  rates  of  interest.  It  enables people to  create  saving  habits among  people, which will help them take better care of their money and help them have a financially stable and secure life.


9. Insurance Policies

Insurance policies are also a saving up scheme that banks provide. People get to save their money to be used in cases of emergencies. For example, there are life insurances, health insurances, automobile insurances, etcetera.


10. Promotion  of  new  entrepreneurs

So, basically through insurance policies and loans, banks give a sense of confidence and motivation for people to start their own entrepreneurship, which leads to self-made goods leading to the hike in the nation's economy.


11. Banks also provide financial aid to the agricultural and other primary sectors.


Banks have always ought to be the people's friends and they are supposed to be helpful. There is a huge responsibility that they need to fulfill, and they do help the people with it. Therefore, the banks are an essential commodity in the growth of the economy.






Disclaimer:-

The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of Light de Literacy and LDL does not assume any responsibility or liability for the same.


An NGO, run by group of socially active, determined & educated youths, aims to educate underprivileged children.

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