How important are commercial banks?

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Commercial banks play a key role in the national and global economy. The importance of commercial banks includes the fact that they serve as a trusted and secure place where the funds of individuals and companies can be held in their name, reducing the need to keep large sums of money in private or commercial facilities. Internationally, commercial banks serve as a source for transferring money from one country to another, eliminating the need to travel with cash. Money paid by depositors into their savings accounts is also used by banks to promote economic growth by lending this money to various businesses and individuals.

An importance of commercial banks is the role they play in the development of the economy. They help many consumers, both individuals and corporations, to purchase items that they would not have been able to acquire without the financial help of banks. This includes the purchase of cars, houses and capital intensive items such as machinery or factories. They also make it easy for their customers to repay the money through long-term financial plans, where the money will be spread over a certain period of time. The advantage is that this makes it easier for borrowers to repay the money, even if they have to pay the interest on the loan as a sort of service charge.

Another importance of commercial banks is that they keep people and their money safe through the services they provide. Since banks make it unnecessary to keep large sums of cash at home or in the office, providing a safe alternative, people can rest easy knowing their money is safe. They can also feel safer knowing that the absence of cash in their homes or places of work makes these places less attractive to thieves.

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Another thing that adds to the importance of commercial banks is the fact that money held on behalf of customers in the form of savings deposits cannot be classified as idle money. This is because this money also earns something for the depositor in the form of interest. On the other hand, if the money is kept at home or in a safe, it will yield nothing and will be classified as idle money.

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