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

Banks play an important role in the economy in the foll. manner:

1. People with surplus deposit their money in banks. Banks keep a small part of it with themselves and the rest is given out to people in need of it as loan. Banks offer interest to people who deposit money and charge an interest from those who take loan from them thus mediating between the lenders and borrowers.

2. Banks keep money in safe custody thus encouraging savings.

3. They give loans at a very low rate of interest as compared to informal sources.

4. Special provisions like Priority sector lending are made for the upliftment of agriculture and other industries.