Question

Why has an increasing share of household savings been channelled through financial intermediaries? Hint: Comment on the role of financial intermediaries

Answer 1

Financial intermediaries act as a link between the service in the economy and the borrowers of the economy. it is used to collect the savings of the household and provide a certain rate of interest and it is then used to provide the loan to the borrowers and collect a certain rate of interest and these intermediaries earn differential as their profit for doing this.

Channelizing the savings of general public through financial intermediaries is helpful in money flow in the entire economy and it helps in generation of credit and also it helps in flourishing of different kind of business which will subsequently generate a lot of employment and add on to the overall gross domestic product of the country.

so it is highly important to channelise the resources which are savings appropriately, into the economy through financial intermediaries, in order to maximize the returns and provide with the loans to the business, in order to generate business profits and overall GDP enhancement