Q.(a) Explain the role of Commercial Banks in economic development.

(a) Commercial banks promote development by mobilising savings, supplying credit and capital, and financing priority sectors. (b) Internal trade is within national borders; international trade crosses them and involves different currencies and restrictions.

(a) Role of Commercial Banks in Economic Development

• Mobilising savings: they collect scattered small savings of the public as deposits and make them available for productive use.
• Capital formation: by channelling savings into investment, they raise the rate of capital formation, which is central to growth.
• Providing credit: they lend to industry, agriculture and trade, financing production, working capital and modernisation.
• Financing priority sectors: they extend credit to agriculture, small-scale industries and weaker sections, promoting balanced development.
• Encouraging entrepreneurship: loans and advances help new entrepreneurs set up enterprises.
• Promoting trade: they finance internal and foreign trade through bills, letters of credit and remittance facilities.
• Implementing monetary policy: they help the central bank control credit and money supply, ensuring stability.
• Regional balance: by opening branches in rural and backward areas they reduce regional inequalities.

(b) Differences between Internal Trade and International Trade