Question

What are the main economic benefits to be gained from (a well run) banking system ?

Answer 1

The main economic benefits of a well-run robust banking system are as follows:

1. It facilitates the channelization of funds that creates demand in the economy as well as capacity building takes place. It contributes to increase in output level and per capita income increases.

2. It brings a strong risk management framework that increases the investor’s confidence. It brings funds for the investment by the firms. It prevents the overheating of the economy.

3. Interest income of the people increases as an outcome of well-run banking system.

4. A well-run banking system, reduces the cost of funding taken up by the firms as borrowers. It contributes to the increase in economic benefits.