Importance of a Bank

IMPORTANCE OF A BANK
The importance of the banking system to an economy no emphasis. A well organized banking system provide liquidity and mobility to the financial resources available in the economy. It helps the economy in the following regards.
1. BRING ECONOMIC STABILITY IN THE COUNTRY
The banks play a prominent role in providing stability to a country economically. It helps in getting out of depression or inflation. During depression the banks follow a cheap money policy and generate money income which pushes up the consumption level and the economy gets price support to reactivate production units and the produced level is enhanced which raises the employment level. The investment rises to stimulate saving and to expand which further increases employment opportunities. Similarly the banks specially the central banks take certain measures to control inflation in the economy. The central bank through it is well adjusted monetory policy stablises the internal price level and thus facilitates economic & development in the country.
2. CO-ORDINATION AMONG ALL THE UNITS
The banking system maintains a coordination among all the units which are engaged in banking functions. It consists of collecting of surplus money from the people and lending them to the entrepreneurs who utilize it for productive purposes.
Creating a country wide circulation of money through remittance facilities.
Activating idle money to make them productive
Provide finance by credit accommodation to different sectors of the economy.
3. ENCOURAGE SAVING
The banks encourage saving by providing safe custody and making it a source of income to the persons who save. The people having surplus money arising out of saving, deposit it with the banks. The banks pay them interest and get them relief from burden of safety and other risks