Question

Why did Smith think that banking needed to regulated?

Answer 1

Need for banking regulations :-

1) Customer deposits the hard earned funds in the bank so to ensure their funds are repaid in timely manner.

2) The bank acts as link between utilising the excess funds in its best possible manner. Thus it assist hugely in economic development of the country. So it is important to regulate theses activities.

3) The another major reason for regulating banking is to avoid fraud by the borrowers and banks.

4) To control the inflation through controlling rates.

5) To protect the investor rights and deals with their grievances.

6) To standardise the process and promote healthy competition among banks