Role of commercial bank in economic development of nepal

The banking sector plays a huge role in the economic development of the country. The bank integrates and mobilizes the capital scattered across the country. For a developing country like ours, the banking system is a bloodbath. The economic development of developing countries is not possible without the development of the banking sector. Therefore, the banking system is considered a powerful tool for the economic development of the country. The role of the banking system in the economy is as follows

  • Capital formation

Capital formation is essential for the economic development of the country. The bank consolidates the capital scattered among the people by accepting it as a deposit. It creates employment and income. In this way, capital is generated from the banking system.

  • Operate the savings

With the development of the banking system, people develop the habit of saving. People can spend and keep the rest in a bank, which in the future can invest in development and productive work that can help the economy.

  •  Creation of employment opportunities

The development of the banking system creates employment opportunities in the country. The development of the banking sector directly creates employment to work in the bank. Similarly, banks and financial institutions indirectly create employment in various productive sectors such as industries, factories, and trade.

  •  Economics development

The development of the banking sector will lead to the establishment of various factories, businesses and enterprises in the country which will produce, create employment and increase revenue.

  • Foreign trade promotion

The development of the banking sector plays an important role in the promotion of foreign trade. High-cost products or non-product items have to be imported from abroad in the country while low-cost items have to be produced in the country and exported abroad. Payment for such transactions is made by the bank itself. The letter of credit used in such transactions is also issued through the bank.

Similarly, the bank has also played an important role in developing the agricultural sector by investing in the agricultural sector, protecting precious metals or assets, and expanding credit.

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