The Banking Sector is the backbone of a country’s economy. Banks and Financial Institutions (FIs) contribute significantly to the growth and development of a nation’s financial health. The most significant indicator of a country’s financial health is its GDP. Banks have contributed to the GDP primarily in terms of (1) capital credit financing (2) consumer liquidity and (3) community upliftment.

Capital Credit Financing:

Banks keep cash reserves and deposits with themselves which are loaned out to industries to finance capital-intensive projects. Such capital-intensive projects have tremendous impact on the volume of products generated and therefore, boost the economy. Banks also impact the GDP by facilitating international trade and foreign exchange transactions.

Consumer Liquidity:

Banks ensure that consumers, who are the driving force of the economy, have enough cash liquidity to purchase goods and hire services. Banks give out term loans to individuals for buying consumer durables and for financing personal small-case projects.

Community Upliftment:

Banks based in semi-urban and rural areas helps in creating awareness about banks and their function. Co-operative banks and Rural Regional Banks (RRBs) provide small credit facilities at low or no rates of interests to marginalised sections of society who lack access to affordable credit.