Role of Commercial Bank In developing Economy

Mobilization of Savings

The bank collects savings of individuals and makes them available for investment.

It increases available of capital in the economy and allows banks to lend.

credit allocation to the productive sector

Commercial banks provide loan to the productive sectors like agriculture, and industries to generate jobs, and prevent money lends to exploit them.

Banks provide short and medium term loans to development projects.

Capital formation

By redirecting savings to the productive sector, banks increase the overall capital for projects. This reduces dependence on foreign funds by using public savings.

Facilitating trade activities

Banks support trades such as exports and imports via letter of credits, and trade documentation.

This helps boost pakistan’s exports and manages trade efficiency.

Promoting financial inclusion and regional development

Commercial bank opens branches in rural areas to expand credits to less served areas.

This helps to reduce regional imbalance, and bring more people into the formal financial systems.

Assisting monetary policy implementation

Commercial banks act as clients to the central bank.

They help regulate inflation, money supply and ensure financial stability,

by changing reserve requirements and lending rates.

Employment generation

By financing new businesses, and industries, commercial banks help create new jobs and counter unemployment.

Profit sharing scheme

The commercial banks receives surplus balances of households and business and pay interests on deposits of clients.

Pakistan ensures all banking is interest free, to prevent exploitation.