Question

What do you mean by 'Financial Intermediation'?

Answer 1

. Self-employment programme: Employment growth is a sign of economic development. Financial Intermediaries, by providing finance for starting self-employment programmes are generating more production and income in the country. In India, after the nationalization of commercial banks, a number of programmes have been initiated by banks for self-employment schemes.

2. Entrepreneurial Development Programmes (EDPs): have been successfully launched by various banks. Initially through Lead Bank Scheme, banks were developing employment opportunities at the district level. Later on, Service Area Approach was adopted in 1978 by which certain specific areas were allotted to the banks for launching different economic programmes for the development of such areas.

3. Integrated Rural development scheme: Under this scheme, financial intermediaries were financing socially and economically depressed people by providing loans to them for various economic activities. One third of the loan will be a subsidy and the remaining two-thirds of the loan will carry a lower rate of interest under the interest subsidy scheme of RBI. In this way, various economic programmes aimed at improving rural economic conditions were undertaken.

Answer 2

Financial intermediation is a productive activity in which an institutional unit incurs liabilities on its own account for the purpose of acquiring financial assets by engaging in financial transactions on the market; the role of financial intermediaries is to channel funds from lenders to borrowers by intermediating