Role of Commercial Bank in Economic Development in India

Topics: Bank, Economic development, Economics Pages: 6 (1746 words) Published: May 15, 2013
Every country needs the services of financial institutions for accelerating the pace of development. Commercial banks have played a critical role in the economic development of a country. Now a day’s commercial banks are important not just from the point of view of economic growth, but also financial stability. In emerging economies, commercial banks are special for three important reasons. First, they take a leading role in developing other financial intermediaries and markets. Second, due to the absence of well-developed equity and bond markets, the corporate sector depends heavily on banks to meet its financing needs. Finally, in emerging markets such as India, commercial banks cater to the needs of a vast number of savers from the household sector, which prefer assured income and liquidity and safety of funds, because of their inadequate capacity to manage financial risks.

Forms of banking have changed over the years and evolved with the needs of the economy. The transformation of the banking system has been brought about by deregulation, technological innovation and globalization. While banks have been expanding into areas which were traditionally out of bounds for them, non-bank intermediaries have begun to perform many of the functions of commercial banks. Thus compete not only among themselves, but also with non-bank financial intermediaries, and over the years, this competition has only grown in intensity. Globally, this has forced the commercial banks to introduce innovative products, seek newer sources of income and diversify into non-traditional activities.

The commercial bank primarily lending and borrowing of money, accepted deposit from the public and payable on demand and withdrawn able by cheque, draft etc. They provide and maintained different type of account like current account, saving account, and fixed deposit and also provide different type of loan, cash credit etc. They help the new class of entrepreneur to setting up their enterprise and different type of facilities for lending money such as e-banking facilities, credit card, debit card, ATM card etc.

To Know helpful in Mobilisation of Savings and Capital Formation. To Know helpful in Innovations.
To Know helpful in the Effective Implementation of Monetary Policy. To Know helpful in Productive activities and Exports.
To Know helpful in the Development of Priority Sectors.

Commercial banks play a significant role in economic development of developing countries like India. It has become an essential part of our working life. It provides accelerating the Rate of Capital Formation for economic growth of our country, short and medium term loans to entrepreneurs to invest in new enterprises and adopt new methods of production, promotion of trade and industry, providing credit for development of agriculture and small scale industries in rural areas. It can also influence the economic activity of the country through its influence on- a. Availability of credit, b. The rate of interest Commercial banks by opening branches in the rural and backward areas are reducing the exchange of goods through barter. The commercial banks are now not confined to local banking. They are fast changing into global banking i.e., understanding the global customer, using latest information technology, competing in the open market with high technology system, changing from domestic banking to investment banking etc. The commercial banks are now considered the nerve centre of all economic development in the country. The use of online banking is now on the increase. It has brought revolution in banking industry.

The present seminar paper is based on the work of commercial bank and its economical development. To finish this...
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