Page 20 - DCOM208_BANKING_THEORY_AND_PRACTICE

Rupesh Roshan Singh, Lovely Professional University
Unit 2: Role of Banks in the Development of Economy

Unit 2: Role of Banks in the Development of Economy Notes

CONTENTS
Objectives
Introduction

2.1 Role of Banks
2.2 Role of Banks in Indian Economy
2.2.1 Role of Banks in a Developing Economy

2.3 Financial Inclusion
2.3.1 Financial Inclusion in India
2.3.2 Economic Growth – Role of Financial Inclusion
2.3.3 Steps taken by RBI to Promote Financial Inclusion
2.4 Summary

2.5 Keywords
2.6 Review Questions
2.7 Further Readings

Objectives

After studying this unit, you will be able to:
Discuss the role of banks in Indian economy
Define financial inclusion

Elaborate on economic growth in Indian scenario
Explain the steps taken by RBI to promote financial inclusion

Introduction

In the previous unit, we dealt with the meaning and nature of banks and characteristics of Indian
Banking System. The unit also discussed about the various functions of commercial banks. This
unit will help you to understand the role of banks in Indian economy. The various section and
sub section of this unit will also summarize the concept of financial inclusion. Banks play an
important role in development of Indian economy. After liberalization, the banking industry
underwent major changes. The economic reforms totally have changed the banking sector. RBI
permitted new banks to be started in the private sector as per there commendation of Narasimham
committee. The Indian banking industry was dominated by public sector banks. But now the
situations have changed. New generation banks with used of technology and professional
management has gained a reasonable position in the bank in industry.

Banks over the years have become a significant aspect of an economy. With the ongoing financial
depression, the position of banks have become all the more important in the course of working
of the money market and hence the economy of a nation. The banking sector forming apportions
of the financial sector primarily works as a financial intermediary generating money supply.

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