Business Support Services: Importance of Banking: Capital Formation, Services to Business and Reduces Use of Currency (For CBSE, ICSE, IAS, NET, NRA 2022)

Doorsteptutor material for competitive exams is prepared by world's top subject experts: get questions, notes, tests, video lectures and more- for all subjects of your exam.

Businessman buys goods from the main market, carries those goods to his shop, stores those systematically and as per customer demand sells this good, they require to arrange funds.

  • While doing all these activities the businessman or owner requires various help or support from others.
  • For example, take loan from bank, hire a tempo or truck in carrying the goods etc.
  • Business support services refer to those business activities that act as auxiliaries to trade and facilitate smooth flow of goods from producer to consumer.
  • It includes various support services such as:
Various Support Services


Banking helps in providing finance and payment facilities. It refers to the various services provided by banks, such as acceptance of deposits, grant of loans and advances, and other supplementary services.

Importance of Banking

Importance of Banking

Capital formation

  • Banking indirectly converts savings into investment.
  • it՚s leading to capital formation and development of economy.

Services to business

  • Providing various services such as:
    • Long-term and short-term finance
    • Arranging remittance of money
    • Collection of cheques and bills etc.
  • Assisting in raising of capital by acting as underwriters and merchant bankers and so on.

Reduces use of currency

  • Travelers can carry travelers՚ cheques, credit cards etc. issued by banks.
  • So, use of currency is considerably reduced.

Mobilization of savings

  • Allow savings to be deposited in different types of accounts.
  • Facilities of withdrawal as and when desired.
  • Interest payment on deposits encourages people to save money.

Benefits to rural economy

  • Rural branches of banks help in mobilizing savings in rural areas.
  • Provide loans to farmers.

Balanced development of economy

  • Identify areas that need special assistance for industrial development and necessary help.
  • Also identify backward regions and help in their economic.

Development of credit policy

  • Credit policy is a pre-requisite for economic development.
  • Central bank of a country develops a proper monetary policy.

Developed by: