Although no wealth is created by Bank, but their essential activities facilitates the process of production, exchange and distribution of wealth.
Some of the major important role of commercial banks in a developing country are as follows: Besides performing the usual commercial banking functions, banks in developing countries play an effective role in their economic development.
Role of commercial banks majority of people in such countries are poor, unemployed and engaged in traditional agriculture. There is acute shortage of capital. People lack initiative and enterprise. Means of transport are undeveloped. The commercial banks help in overcoming these obstacles and promoting economic development.
The role of a commercial bank in a developing country is discussed as under. Mobilising Saving for Capital Formation: The commercial banks help in mobilising savings through network of branch banking.
People in developing countries have low incomes but the banks induce them to save by introducing variety of deposit schemes to suit the needs of individual depositors. They also mobilise idle savings of the few rich.
By mobilising savings, the banks channelise them into productive investments. Thus they help in the capital formation of a developing country. The commercial banks finance the industrial sector in a number of ways. They provide short-term, medium-term and long-term loans to industry. In India they provide short-term loans.
Income of the Latin American countries like Guatemala, they advance medium-term loans for one to three years. But in Korea, the commercial banks also advance long-term loans to industry.
In India, the commercial banks undertake short-term and medium-term financing of small scale industries, and also provide hire- purchase finance. Besides, they underwrite the shares and debentures of large scale industries.
Thus they not only provide finance for industry but also help in developing the capital market which is undeveloped in such countries. The commercial banks help in financing both internal and external trade. The banks provide loans to retailers and wholesalers to stock goods in which they deal.
They also help in the movement of goods from one place to another by providing all types of facilities such as discounting and accepting bills of exchange, providing overdraft facilities, issuing drafts, etc. Moreover, they finance both exports and imports of developing countries by providing foreign exchange facilities to importers and exporters of goods.
The commercial banks help the large agricultural sector in developing countries in a number of ways. They provide loans to traders in agricultural commodities. They open a network of branches in rural areas to provide agricultural credit.
They provide finance directly to agriculturists for the marketing of their produce, for the modernisation and mechanisation of their farms, for providing irrigation facilities, for developing land, etc. They also provide financial assistance for animal husbandry, dairy farming, sheep breeding, poultry farming, pisciculture and horticulture.
The small and marginal farmers and landless agricultural workers, artisans and petty shopkeepers in rural areas are provided financial assistance through the regional rural banks in India. These regional rural banks operate under a commercial bank.
Thus the commercial banks meet the credit requirements of all types of rural people.
People in underdeveloped countries being poor and having low incomes do not possess sufficient financial resources to buy durable consumer goods. The commercial banks advance loans to consumers for the purchase of such items as houses, scooters, fans, refrigerators, etc. In this way, they also help in raising the standard of living of the people in developing countries by providing loans for consumptive activities.Discuss the Importance of Banks in Detail – Role of Commercial Banks May 10, by zkjadoon Importance and Role of Banks: Banking plays an important role in the financial life of a business, and the importance of banks can be seen from the fact that they are considered as to be the life-blood of modern economy.
Commercial Banks have always played an important position in the country’s economy. They play a decisive role in the development of the industry and trade. They are acting not only as the custodian of the wealth of the country but also as resources of the country, which are necessary for the economic development of a nation.
A commercial bank will count a credit card as an unsecured loan, meaning you will not have to put up any collateral. You can issue credit cards to company officers and instruct them to use them to make all purchases. This places the commercial bank in the role of organizing and tracking your expenses.
A commercial bank is an institution that provides services such as accepting deposits, providing business loans, and offering basic investment products. The main function of a commercial bank is to accept deposit from the public for the purpose of lending money to the borrowers.
Commercial Banks and the Big Picture The process of launching a commercial bank foreshadows the overall role that these banks play in the economy.
A commercial bank is basically a collection of. Commercial banks link parties with excess funds to those with a deficit of funds. They also foster economic growth, underwrite securities, act as monitors and minimize instabilities, according to Franklin Allen and Elena Carletti in "The Oxford Handbook of Banking." Banks are important players in.