In layman’s term, a bank can be defined as a financial institution which has been designated by the government of a nation to exchange, lend and protect the money and assets of the public.

If the world was without banks, major part of the world’s population would be out of jobs. The financial sector would have never emerged in the first place. It would be like a human born without a backbone to support the torso. This means a void that would hinder the growth of an economy.

Banking is the key for the emergence and survival of any financial sector of a country. More importantly, a financial sector is of key importance for a country to prosper economically. Let’s analyze some of the key aspects which are affected due to banking:

• Formation of capital is very important, especially for all the under developed and the developing nations. This is because since poverty is a key concern, it is but obvious that the rate of saving would be extremely low. Here, an effective system of banking for commercial purposes is of utmost importance to make the current savings available for the entrepreneurs to invest and produce which would in turn contribute to the growth of the economy.
• For effective monetization of money, opening of banks in different parts of the country is very important. This is especially true for all the rural and other under developed areas where everything remains dormant. Mobilization of resources would only be possible if new branches of banks are opened in these areas. This would also open doors to the external world which means development in all aspects.
• Novelty and innovation are the key aspects for any form of progress to remain constant. The same is true for economic growth. For this, banks are the key since they need to finance new and innovative business projects to boom a particular economy.
• Banks offer credit facilities which are the driving force for any business project to be put into action. In a developing nation such as India where in agriculture is main livelihood for the major part of the population, investing in such sectors is of high importance. So, apart from trade and commerce, banks are a must to venture into the unknown.
• Banks are a source for loans and advance installments of money. They are a source of money for setting up any new or spreading an existing business establishment.

All in all, the very functioning of the world would come to a standstill if banks cease to exist. However, banks are just one aspect of a nation’s financial sector, although the most important one!

Pratibha Srinivas is a writer by profession and has written on a vast number of subjects.

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