24. Explain with examples the role of banks in the economic development ofthe country. (Set 1)
In this regard, it must be noted that the banks role is not limited to accepting deposits but they also perform various other functions as well.
1. Granting Loans and Advances - Granting loans and advances to the investors is the second most important function performed by the commercial banks. The commercial banks keep only a fraction of the deposits received with themselves as reserves and extend the rest as loans and advances to the borrowers for various productive purposes.
2. Agency Functions - Besides performing the major functions of acceptance of deposits and granting of loans, the commercial banks also perform various agency functions as well such as transfer of funds, collection and payment of funds, purchase and sale of securities and foreign exchange, provision of underwritting facilities, etc.
3. Discounting Bills of Exchange - By discounting bills of exchange a commercial bank provides easy means of finance to the business community as and when required.
4. Credit Creation - The commercial banks create credit in the economy through demand deposits. Credit creation paves the path for the growth of the economy.
5. Other Functions - Apart from the above mentioned functions, the commercial banks also perform various other functions as well such as providing locker facility, issuing traveller's cheque and letters of credit and providing useful business and statistical information.
In this regard, it must be noted that the banks role is not limited to accepting deposits but they also perform various other functions as well.
1. Granting Loans and Advances - Granting loans and advances to the investors is the second most important function performed by the commercial banks. The commercial banks keep only a fraction of the deposits received with themselves as reserves and extend the rest as loans and advances to the borrowers for various productive purposes.
2. Agency Functions - Besides performing the major functions of acceptance of deposits and granting of loans, the commercial banks also perform various agency functions as well such as transfer of funds, collection and payment of funds, purchase and sale of securities and foreign exchange, provision of underwritting facilities, etc.
3. Discounting Bills of Exchange - By discounting bills of exchange a commercial bank provides easy means of finance to the business community as and when required.
4. Credit Creation - The commercial banks create credit in the economy through demand deposits. Credit creation paves the path for the growth of the economy.
5. Other Functions - Apart from the above mentioned functions, the commercial banks also perform various other functions as well such as providing locker facility, issuing traveller's cheque and letters of credit and providing useful business and statistical information.
