ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Banks act as a bridge between investors and savers, i.e. those who save but cannot use the funds themselves. They activate the idle resources of the community and bring them to productive uses. Banks accepts deposits and advance loans to businessmen and traders.

Detailed explanation-2: -Banks as Financial Intermediaries Banks act as financial intermediaries because they stand between savers and borrowers. Savers place deposits with banks, and then receive interest payments and withdraw money. Borrowers receive loans from banks and repay the loans with interest.

Detailed explanation-3: -A financial system functions as an intermediary between savers and investors. It facilitates the flow of funds from the areas of surplus to the areas of deficit. It is concerned about the money, credit and finance. These three parts are very closely interrelated with each other and depend on each other.

Detailed explanation-4: -Although banks do many things, their primary role is to take in funds-called deposits-from those with money, pool them, and lend them to those who need funds. Banks are intermediaries between depositors (who lend money to the bank) and borrowers (to whom the bank lends money).