The Important Roles played by the Banking Institution in India



Some of the important roles played by the Banking Institution in Indian are as follows:

Banking involves dealing in money and credit. Its functions include accepting deposits in different accounts and extending loans to individuals, firms and companies for various purposes.

Banking plays several roles:

1. Generates savings:

A bank is a financial intermediately that encourages individual and business units to deposit their excess funds. Individuals are encouraged by offering them various schemes. People can deposit their money in the form of savings account, current account or fixed deposit account.

2. Lending loans:

The second role played by banking institution is lending. The amount accumulated from the deposits is given as loan to the borrowers. Lending loans and advances depends upon the repaying capacity of the borrowers. The borrows can be a general public or an entrepreneur.

3. Encouraging entrepreneur:

Bank provides loans and advances to the entrepreneur who set up new business ventures. Several financial institutions like IDBI, SIDBI, and IFCI etc. are engaged in providing financial assistance to the rising entrepreneurs.

4. Agriculture and rural development:

Around 70 percent of India's population resides in rural areas. Many banks have opened their branches in such areas. Many regional rural banks have also been established. NABARD is the apex bank in the field of agriculture and rural finance.

5. Industrial Banking:

Financial institutions like IDBI, IFCI have been established to provide developmental and financial support to the industries. This assistance can be in the form of loan and issue of shares. Banking is regarded as an essential service for trade and industry. Banks provide short-term loans, overdraft, and credit facilities.

They also provide term loans and various other services. Banking plays an important role in mobilising the savings of people and channelizing them to trade and industry.

6. Support to the government:

Government has made it compulsory to provide 40 percent of their advances to the borrowers in priority sectors like agriculture, small scale industries, etc. In India loans are given by the banks under IRDP i.e. Integrated Rural Development Programme and SEEUY i.e. Self Employment to Educated Unemployed Youth Programme.