How important are commercial banks?

businessman making thumbs up

Commercial banks play a key role in the national and world economy. The importance of commercial banks includes the fact that they serve as a trusted and secure place where funds from individuals and businesses can be held in their names, reducing the need to keep large sums of money in private or business premises. Internationally, commercial banks serve as a source for transferring money from one country to another, eliminating the need to travel with cash. Banks also use the money paid by depositors into their savings accounts to promote economic growth by lending this money to various businesses and individuals.

An importance of commercial banks is the role they play in the development of the economy. They help many consumers, both natural and legal persons, to acquire items that they would not have been able to acquire without the financial help of banks. This includes the purchase of cars, houses, and capital-intensive items such as machinery or factories. They also make it easy for their clients to return the money through long-term financial plans, in which the money will be distributed over a certain period of time. The advantage is that this makes it easier for borrowers to repay the money, even if they have to pay interest on the loan as a kind of service charge.

Another importance of commercial banks is that they keep people and their money safe through the services they provide. Since banks make it unnecessary to have large sums of cash at home or in the office by providing a secure alternative, people can rest easy knowing their money is safe. They can also feel more secure knowing that the absence of cash in their homes or workplaces makes these places less attractive to thieves.

See also  What is an auditor certificate? (with photo)

Another thing that adds to the importance of commercial banks is the fact that money held on behalf of customers in the form of savings deposits cannot be classified as idle money. This is because this money also earns something for the depositor in the form of interest. On the other hand, if the money is kept at home or in a safe, it will not yield anything and will be classified as idle money.

Related Posts