14 December 2017

Need of banks in a Country

Need of banks in a Country | Sulthan Academy

We all have a bank account these days. Specially after demonetization and digital cash initiatives in India the number are increasing. But the question is why there is a need of Bank. A sound banking system is necessary to achieve the following objectives:
1. Savings and capital formation

Bank plays a vital role in mobilizing the savings of the people and promotes the capital formation for the economic development of the country.

2. Canalization of savings

The mobilized savings are allocated by the banks for the development of various fields such as agriculture, industry, infrastructure, communication, transport etc,.

3. Implementation of Monetary Policy

A well-developed banking system can easily implement the monetary policy because development of the economy depends upon the control of credit given by the banks. So, banks are necessary for the effective implementation of monetary policy.

4. Encouragement of Industries

Banks provide various types of financial services such as granting cash credit loans,issuing letter of credit, and bill discounting etc., which encourages the development of various industries in the country.

5. Regional development

Banks,by transferring surplus money from the developed regions to the less developed regions reduces regional imbalances.

6. Development of Agriculture and other neglected sectors

Banks are necessary for the farmers. It also encourages the development of small-scale and cottage industries in rural areas.

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