The role of corporate banking in the modern economy

Corporate banking has played a critical role in the modern economy. In fact, it even gave birth to digital banks like Revolut and N26 (you can read this detailed N26 review from Bankopedia for more details). Banks form the backbone for the development of industry and trade by facilitating the circulation of money. By means of various current account benefits, they offer vital services to companies to help them thrive and grow, which in turn supports economic growth.

Banks Are Indispensable to Economic Growth

Banks are the lifelines of economic growth, as they aid capital formation and facilitate commerce. Here are the key roles:

Capital formation: Banks allow individuals to save money and earn interest on the savings. They also enable people to invest in various financial instruments and earn returns. This capital creation and mobilization acts as the lubricant for the production of goods and services. 

Business currency account:Any business that is a separate entity from its owners needs to open a current account. This can be done easily by submitting the documents required for current account, such as

  • Company’s PAN card, 
  • Proof of address, 
  • Memorandum of Understanding, 
  • Certificate of Incorporation,
  • Articles of Association.

A company can easily conduct all its financial transactions through this account, with unlimited and free funds transfers using NEFT, RTGS,and IMPS. Apart from this, reputed banks offer several other current account benefits, including mobile banking, free demand draft issuance, SMS alerts, doorstep banking, free bank statements, and business current account debit card.

Business loans: Companies take long-term loans from banks to fund capital expenditure, like the purchase of machinery and equipment. Loans are available for the medium term to enable businesses to finance their inventory requirement. Through current account benefits like overdraft facility, banks offer businesses the funds to meet their working capital needs. The availability of money helps businesses seize opportunities and expand their operations.

Foreign transactions: Banks also facilitate foreign trade transactions by offering services like foreign bank guarantee, foreign letter of credit, and import finance. Moreover, companies can receive foreign remittances into their business current account, make payments to foreign companies, and use facilities like hedging and currency protection.

Domestic trade finance:Banks facilitate domestic trade by offering services like domestic bank guarantees, letter of credit, and bill discounting. These help traders purchase the inventory well in time for leveraging attractive business opportunities.

Enable innovation: Without access to financing, businesses cannot invest in research and development. There would be no innovation, which is important in improving our lifestyle. Even critical industries like pharmaceuticals would not be able to discover new cures for diseases.

Often business seek financial advice or counsellors from reputed banks. Learning about the various current account benefits and wide range of services being offered helps businesses take informed financial decisions.

The growth of trade and industry creates jobs in the economy, increases the tax collection by the government to fund infrastructure development and brings in foreign exchange into the country.

What do you think?

Written by David Thacker

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