Question

Outline the crucial roles that banks play in the modern financial system. In your answer, make distinctions between different types of bank (central, commercial, investment etc).

Answer 1

Banks can play various kinds of role to the overall economy like-

1. Providing link between the borrowers and the savers and offering them with rate to earn the income that can beat inflation. These are the facilities provided by the commercial banks of the country.

2. Bank can also act as formulator of monetary policy in the economy. Monetary policies are formulated by the central bank of the country.

3. Banks can also offer underwriting facilities with regard to to issuance of shares with respect to a new company in the form of initial public offer. These are the banks which are known as investment banks.