Roles of Bank in Economic Development

Roles of Bank in Economic Development

Roles of Bank in Economic Development

The bank is the backbone of an economy. Money, bank, and economy are related with one another. Total economy of a country is based on the bank. So, an organized banking system is a must for economic development. It is said that “the bank is the lifeblood of the modem economy.” Roles of the bank in the economic development of a country are given below:

Roles of Bank in Economic Development-

  • Creation of Medium of Exchange

Issuance of notes is the main task of the central bank in any country. Also, cheque, pay order, draft, credit card, traveler’s cheque etc are issued by commercial hank. And those sometimes used as money. This medium of exchange makes the transaction easier.

  • Supply of Capital and Increase of Investment

After collecting deposits bank lends it to the needy people and invest in many productive sectors. Consequently, that speed up the economy.

  • Formation of Capital

Capital is must for the development. Bank collects the idle money from the public and forms it into capital. Bank gives interest to the depositors and encourages them to create savings.

  • Help in Domestic Trade

Ranks help in a home trade by giving the loan to SME sectors and industrial sectors. Business people can transact safely and banks work as the adviser for them.

  • Help in Foreign Trade

In case of foreign trade, the help of hank is the must. An opening of L/C, shipping documents, a collection of bill etc is done through the bank.

  • Industrial Development

Without the development of industrial sector, the total development of a country cannot be possible. Banks motivate and response to make a sustainable industry.

  • Agricultural Development

Agriculture is the backbone of many countries. Banks give loan and finance this sector in many ways. Modem instruments are sometimes costly for the peasants. Bank gives loan for this purpose.

  • Credit Control

Credit is such type of thing that needs to be limited to a certain boundary. Central bank limits the boundary of credit flow in a certain economy. Thus opens the door to economic development.

  • Increase of Production

It is not possible to be developed as a large industry without the help of the bank. Bank may supply financial support for the production. The sound production is the reflection of sound and an organized economy.

  • Price Stability

By controlling the credit and money, the bank keeps the price of the necessity stable. That ensures the continuation of economic development.

  • Specialized Banks

An economy, of a country, has different sectors. To contribute to such sectors, many specialized banks have established. Such as agricultural bank, commercial bank, development bank, cooperative bank etc.

It is not possible to describe the huge contribution of the bank in the economic sector of the country in short. Students can learn many other roles of banks by investigating the real picture of the economy and banks.