How do banks play an important role in the economy of India? Explain.

Banks play an important role in the economy of India in the following manner:

a. Bank accepts money from the public and uses this money to provide loans and advances to the public as well as to the government.

b. Banks pay interest on the money deposited by the public.

c. After keeping a small portion of the deposit in the form of Reserve, banks lend out the remaining portion to the borrowers and charge another rate of interest from them.

d. Banks charge a higher rate of interest on loans than what they offer on deposit.

e. The difference between the two rates of interest is the main source of the income of the bank.