Modern banks play an important part in promoting economic development of a country. Bank provides necessary funds for executing various programmers underway in the process of economic development. They collect savings of large masses of people scattered throughout the country, which in the absence of the banks would have remained ideal and unproductive. These scattered amounts are collected, pooled together & made available to commerce in industry for meeting the requirements.
Economy of Bangladesh is in the group of world's most underdeveloped economies. One of the reasons may be its underdeveloped banking system. Government as well as different international organizations have also identified that underdeveloped banking system causes some obstacles to the process of economic development. So they have highly recommended for reforming financial sector.
Banks are becoming more important to the economy as a whole and to local communities day by day. Certainly banks can be identified by the functions (service or role) they perform in the economy. Bank is a financial intermediary accepting deposits and granting loans; offers the widest menu of services of any financial institution. Banks are the most important financial institution in the economy. They are the principle sources of credit (loan able funds) for millions of individuals and families for many units of the government. Banks are also closely watched because of their power to create money in the form of easily spend able deposits by banks appears to be closely correlated with economic conditions, especially the growth of jobs & the presence of absence of inflation. The fact that banks creates money, which impacts the vitality of the economy. Bank provides individuals and business with loans that support consumption and investment spending.
Financial Institution perform the essential economic function of channeling funds from people who have saved surplus funds by spending less than their income to people who have a shortage of funds because they wish to spend more than their income. The channeling of fund from savers to spenders is so important to the economy because people who save are frequently not the same people who have profitable investment opportunities available to them. The absence of financial market individual lender and investor/borrower cannot get together. Without a financial market it is hard transfer funds from savers to investors/borrower. Financial intermediaries' i.e. Depository Institution like Commercial Bank, Savings & Loan Associations, and Credit Institutions. It mainly consists of export, import and other foreign remittance. Direct Investment, export import and foreign remittance etc. play an important role in a developing economy. There is a great opportunity to invest the foreign remittance, which also comes from 'wage earners' working abroad, in several prospective investing...