A banking system is a group or network of institutions that provide financial services for us. These institutions are responsible for operating a payment system, providing loans, taking deposits, and helping with investments.
The health of any economy is directly related to the financial status of its banking system. The Indian Banking System is regulated by the Reserve Bank of India, which was set up in 1935 under the Reserve Bank of India Act, 1934, and nationalized in 1949.
The Banking System is called the backbone of any economy for a variety of reasons. Firstly, it plays a vital role in economic development by mobilizing resources and allocating them better. It also keeps the cash flowing in the economy. Secondly, it provides financial resources to an individual, corporation, government, or a sector in need. That helps in developing large infrastructure in the country and providing better facilities to the people. Thirdly, it employs a large number of people, thus contributing to employment generation. Fourthly, it helps in tackling the problem of black money. Black money, as we all know, is a bane for any economy. Moreover, it helps in reducing corruption by helping the government to directly transfer financial benefits to the people.
But the banking system has its own challenges such as the NPA, which must be tackled to improve its health. Despite this, it remains a boon to the economy. There was a time when money lenders used to exploit people. Those days of suffering are now over, all thanks to the Banking System.
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