Commercial Banks and Financial Institutions-Sources of Business Finance

The bank is considered as the center of finance and it plays a vital role in the economy of our country. A bank is a place where the people keep their money where it will be in safe and secured. Therefore by considering this importance, we will look at the commercial banks and the financial institutions.

  1. A) Commercial banks

Monetary assets are present in the banks and therefore it plays an important and dominant role in all the financial sectors. Assets are given by banks for different purposes and for different time periods and it helps in the growth of the economy of our country. For the loan rate for the premium will be applied. In the form of the overdrafts, loans, discounting of bills, cash credit the commercial banks issues the loans. To, produce products and for the industrial growth and to provide the job opportunities the commercial banks help the people by giving loans.

Forgetting loans from the bank the lenders should produce the security for the loan. The services provided by commercial banks are corporate advisory services, merchant banking, etc.

Advantages of the commercial banks

According to the requirement of the business, the amount can be borrowed from the banks and the bank act as a flexible source of the finance. If there is no need of fund s means it can be repaid in advance. The information about the lender’s personal information will be kept confidential. And continue reading about the advantages of the commercial banks in respective websites available.

  1. B) Financial institutions

Depending on the growth of the industries only, the development of the economy of the country takes place. Therefore by the developed financial system supports the country’s economic growth by providing funds to the business. For this purpose, the governments have formed the financial institutions over the world to issue finance to the business. As the aim of the financial institution is to promote the development of the industries it is called as the development banks. The function of the financial institution is the transfer of the financial sources from the person who save it and to those who need the finance.

The financial institution has been set up by the state and the central government. Both the own capital and the loan capital is given for the long term and the short term requirement of the money. Industrial finance corporation of India, state financial corporation, industrial development bank of India, etc are the special financial institutions.

Advantages of the financial institutions

One can get finance for the institutions even they are not getting from the source of finance in the market. They also give the consultancy to the business firms.