The Role of Banks in the Economic Development of a Country - Commercial Banks
Here
is the role of banks (Commercial Banks) in the economic development of the country.
Safe Custody of Valuable Documents
Bank
plays an important role in our economy. We deposit money and get credit from it
for various purposes, like we need money to start a new business, purchasing a
car, etc. It provides safe deposit and custody of valuable documents. The safe
deposit can be possible by opening checking account or credit card for sending
and receiving money. Online Banking is also more secure and modern trend for
this purpose.
You may Read about What is Bank Reconciliation Statement in banking System.
Regulatory System
If you
want to start a new bank or close the existing one, then you must get the permission
from the Government. Govt. makes rules and regulations for the operations of
the banking system. Consumers and businesses can make tight check and balance
on the performance of the bank towards the economy.
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Source of Employment
Bank
is also a major source of employment. Many students studying commerce subjects
like accounting, business statistics, business administration, finance, etc.
are interested in getting jobs in the banks after completing their studies. So
the bank has main holds for providing career opportunities in business, finance
and economics fields. Banks provide employment opportunities to suitable
candidates and play an important role in stabilizing the economy. It is
important to note that due to use of advance technology, the routine banking
system are done with the help of machines like ATMs, writing a cheque, sending
and receiving money are done through machines. Due to advanced technology, the
manual routine banking transactions are decreased so up to some extent, the
level of un-employment is also raised up to some extent in banking sector.
Modern
Banking System
Automatic
system of normal baking transactions also affect the business of banks. Due to
increasingly purchasing equipment, the fixed costs are increased and variable
costs are decreased.
Note:
Fixed Cost is fixed over the period of time and variable cost changes with the
interval of time.
Fixed
costs include purchasing of electronic devices like computers, ATMs, etc.
Variable costs include employees’ age, salaries and working hours, etc.
The objective
of Banks is to try their level best to get maximum output at minimum cost. They
provide efficient resources (Machines & Human Capital) at minimum cost (
Cost of Production that include Purchasing of equipment, salaries, services, etc).
Due to this objective, the optimization process are taken place in this sector
and hence machines and services and employees must give maximum time to operate
in the working hours to provide quality to the customers.
Globalization
Globalization
of banking system is also increased and as a result healthy competition is also
increased among banks whether they are established in regional, national or
international level. For example, there is competition among US Bank and Bank
of the West, Union Bank and City Bank and so on. Such Competition should be
healthy so is good sign for the growth of the economy. Such competition exits
in Accuracy, Quality, and Friendliness of services in the specific areas of the
market.
Satisfaction
of Customers
Customers
want to establish strong relationship with banks. Such relationship depends
upon Credibility, Stability and Accuracy of the services providing by the bank.
In fact, banking system requires personal traits like Honesty, Courtesy, Reliability,
Willingness, attention to detail in order to create new ideas and ways for fulfilling
the demands of customers. In this fast growing Banking System, the bank should
adopt updated system to meet the demand of market and to satisfy the customers.
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