Question

How banks play role of mediator in economy ?

Answer 1

Banks play an important role in the economy: 

1. They only keep about 15% of the deposits as cash. The rest is used to give loans to various people.

 2. Loans are required for various economic activities as well as investments, Banks mediate between people having surplus cash and those in need of it. 

3. They give interest to the depositors and they charge interest on those taking loans from the banks. The difference between the interest rates is the main income of the bank. 

4. Banks encourage depositing money by giving an interest This contributes to savings in the economy. 

5. By providing credit at reasonable interest rates, they encourage investment and prevent exploitation from the informal sector.

Answer 2

Heya..

See here for your answer...

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Banks play the role of mediators in the economy it is true, by this -

::: Banks accept our demand deposits , what of our income we have surplus we submit in bank and enjoy intrest ..

||||||||||||||banks ( in mid )

::: Then some part of that demand deposit kept by bank in terms of CRR and other rest of money is used to provide loans to the others...

So,, bank play the mediators between us ( who r depositing their income ) and the others ( who r Loan takers)

Thank you