Functions of Commercial Bank - Indian Banking System, Indian Financial system Video Lecture | Indian Financial System - B Com

now what is the role of commercial bank
role of commercial bank is that it helps
in capital formation capital formation
in the sense that the money that is
saved goes into proper channels goes
into proper investment and that leads
into the development of the economy now
what does what is the most important
thing for an economy to grow that it
needs capital it needs fund and from
where does that fund comes that fund
comes from the banks which mobilizes
them from the people or the household so
one important function is that it helps
in capital formation and second is that
it mobilizes savings from chant properly
from households it brings it to the
investors so it mobilizes savings then
allocation of funds and optimum
utilization of savings now what does it
do it allocates the funds wherever it is
necessary now this was not so earlier
before nationalization commercial banks
were mostly in private hands so what did
they do they lend it money or they gave
money to take business houses whoever
had money they gave more money to those
people they did not have that economic
development or upliftment of the society
or all these things into mine they had
just business in their mind and so more
money was not given on the priority
sectors it was given to at times it was
given to industry where it was not at
all required also so but after
nationalization when RBI has a control
over it and the government also has a
control over it allocation of funds have
been done in a proper way
wherever it is necessary funds are
provided and that sector has grown so
that has led to optimum utilization of
the safe
because ultimately when they save our
money we know and we need that it should
go in the right place so it does the
allocation of funds in a proper way
increases investment as people get good
returns they are encouraged to more and
save more so that their money can be
used and it also increases investment
and people save more there is more
investment in the economy and also as I
had told you it creates credit and that
is how it adds to the money supply and
promotes adds to the money supply and
that is how it promotes economic growth
as well so this is the basic role of
commercial bank in economic life of our
country