Role of Banks and Financial Institutions in Economy: An Overview

Abstract

Banks and financial institutions are important as financial mediators that organize savings and channel them into productive investments. This paper covers the driving capital formation, credit creation, and economic growth. This paper also promotes the financial inclusion, managing risk, and ensuring liquidity and stability, with roles extending from traditional lending to supporting new-age digital finance and niche credit needs. The Indian banking sector was usually confined from foreign ownership due to sovereignty and stability concerns. This paper focuses on the economic development of the country as it encourages both savings and investment.