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    Commercial banks play an important role in the economic development of a country by (1) accepting deposits and providing funding to businesses for productive purposes, promoting capital formation. (2) Providing short and medium term loans to entrepreneurs for investment in new enterprises and production methods. (3) Facilitating both domestic and international trade through financial instruments like bank drafts and credit cards. (4) Providing credit to the agriculture sector to increase productivity and farmer incomes, supporting development of agriculture and small industries.

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    Banking notes

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    Role of Commercial Banks in the Economic Development of a Country

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    Commercial banks play an important role in the economic development of a country by (1) accepting deposits and providing funding to businesses for productive purposes, promoting capital formation. (2) Providing short and medium term loans to entrepreneurs for investment in new enterprises and production methods. (3) Facilitating both domestic and international trade through financial instruments like bank drafts and credit cards. (4) Providing credit to the agriculture sector to increase productivity and farmer incomes, supporting development of agriculture and small industries.

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    145 views1 page

    Role of Commercial Banks in The Economic Development of A Country

    Uploaded by

    sn n
    Commercial banks play an important role in the economic development of a country by (1) accepting deposits and providing funding to businesses for productive purposes, promoting capital formation. (2) Providing short and medium term loans to entrepreneurs for investment in new enterprises and production methods. (3) Facilitating both domestic and international trade through financial instruments like bank drafts and credit cards. (4) Providing credit to the agriculture sector to increase productivity and farmer incomes, supporting development of agriculture and small industries.

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    Role of Commercial Banks in the Economic Development of a Country

    1. Banks promote capital formation: Commercial banks accept deposits from individuals and
    businesses, these deposits are then made available to the businesses which make use of them for
    productive purposes in the country. The banks are, therefore, not only the store houses of the country’s
    wealth, but also provide financial resources necessary for economic development.
    2. Investment in new enterprises: Businessmen normally hesitate to invest their money in risky
    enterprises. The commercial banks generally provide short and medium term loans to entrepreneurs to
    invest in new enterprises and adopt new methods of production.
    The provision of timely credit increases the productive capacity of the economy.
    3. Promotion of trade and industry: With the growth of commercial banking, there is vast expansion in
    trade and industry. The use of bank draft, check, bill of exchange, credit cards and letters of credit etc
    has revolutionized both national and international trade.
    4. Development of agriculture:
    The commercial banks particularly in developing countries are now providing credit for development of
    agriculture and small scale industries in rural areas.
    The provision of credit to agriculture sector has greatly helped in raising agriculture productivity and
    income of the farmers.

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