Role of Commercial Banks in the Economy

Role of Commercial Banks in the Economy

As we know that main objectives of a commercial bank is to earn profit by the process of accepting of deposits and advancing loans through different methods. Although these functions are the basic function of commercial banks, but there are a lot more functions which enhances the importance of banks today.

1. Acceptance of deposits, by opening different kinds of bank accounts
2. Advancing of loans to needy persons through different methods and requirements
3. Provisions of agency and general utility services to his customers
4. Making new investments in different organizations and increasing the productive capacity of the country
5. Promote capital formation in the country by mobilizing and collection of savings for the purpose of investments
6. Development of industries in the country according to the requirements of the economy
7. A balanced development in the economy is achieved in different sectors & regions through the resources of bank funds
8. Development in agricultural production is made possible by providing different kinds of loans
9. These banks help in reducing reliance in foreign assistance by their efforts in the mobilization of domestic savings
10. These banks help in the implementation of an effective monetary policy according to the objective to central bank.
11. Commercial banks also help in the creation and distribution of money through the sales and purchase of securities.
12. Commercial banks are the custodian and distributor of liquid capital of the country, which is the life blood of all commercial and economic activities of a country.