Banks are indeed the most trusted and the most secure way of storing money. It provides some of the most secure ways of handling monetary currency and storing and using it for further use. This is the most trusted and secure way of holding and securing transactions. This money is held in monetary terms as well as in other forms also. Banks provide lockers in order to equip its customers with the facility of storing their most valuable or antique items. This facility is provided with the fact in order to keep the items safe with a trusted entity. The bank acts as a trusted and safe entity securing the most valuable belongings of its customers to keep it safe and secure.
Service Sector Is Supreme but It Is Highly Dependent on Banks
The service sector industry stays as the supreme arm of global economy contributing a hefty chunk to the world economic system and becoming the chief source of employment. This has also helped extensively in eradicating poverty by means of assisting the poorest of the poor by giving them work in the service sector industry and to help them earn significantly. The service sector industry remains the supreme extensive contributor to financial system globally employing maximum workforces internationally.
To maintain the service industry, following certain guidelines and rules is required. Policies decided by regulators needed to be followed by banks and other service sector institutions. The preservation and offering of services are of utmost importance if the sector needs to grow, nurture and expand themselves in every way possible in proper and sound surroundings.
Banks Are Saviors for The Service Sector Industry
Banks remain the greatest beneficiary of the services sector industry often contributing to its policies and other factors. They are also the greatest reliability source for the service sector industry and hence need to be properly watched and regulated. This has often led to the reliability of small-scale sector industries and many other big companies and conglomerates often relying on banks to pull them out of a serious and fallible problems.
But…What About NPAs? Are These Death Knell for Banks?
Banks have provided these industries with the loans they need to run themselves. The banks are hence regulated by a regulator in every country. In India, the banks are regulated by the Reserve Bank of India. All the banking transactions are made under the rules and regulations of the Reserve Bank of India. The Reserve Bank of India foresees every bank. The loans given by banks often not returned back on time are known as Non-Performing Assets (NPAs). These NPAs when not returned on time often cause a lot of headache to the bank and result in loss of public money. This leads to loss of trust from the bank and the ultimately failure of the bank.
Symbiotic Relation between Agriculture, Service Industry and Banks
India is, in particular, an agricultural financial system. Agricultural contributes a lot to the financial system. Agriculture involves developing and promoting of crops, poultry, fishing, farm animals rearing, and animal husbandry. People in India earn their livelihood by concerning themselves in lots of those activities. These activities are vital to our economy. The Indian economy has seen a major boom in the last few decades. The credit for this growth largely goes to the service sector. Agriculture and associated sectors have additionally been improvised to cater to global requirements and the export of diverse merchandise has seen an upward movement thereby adding to the economic growth. This would not have been possible if banks were not there to assist the agriculture industry.
On the other hand, the commercial sector does not lag behind a bit. A variety of new large scale as well as small scale industries have come up and those have additionally proved to have a positive impact on the Indian economic system. Again, banks made it possible.
Likewise, service sector has additionally helped the country by making its contribution. This sector has seen unprecedented growth in the previous decade. Tourism and hotel industries have seen gradual growth. As in keeping with a current survey, the service sector is contributing to close to or perhaps more than 50% of the country’s economic system.
But What If Banks Go Bankrupt
The Curious Case of The Fall of YES bank
The meteoritic rise and ultimately the fall of YES bank has scarred the Indian Economy. This is followed by the effect of coronavirus on the economy causing a great deal of loss from the share market. After the failure of YES bank the share market took a great hit. This caused Nifty and Sensex to fall crashing throughout the stock market. In 2004, the prices for the current stocks were nearly Rs 1500 per share and as of 3rd or 4th March, it came crashing down to a merely Rs 5 per share.
Bank Scams: The Most Disastrous Scenario for Indian Economy
Bank scams are one of the most disastrous factors for any economy. Hence, the scamming banks must face stringent action by the regulators. Bank scams cause a dis-balance in the economy often leading to weakening of the market.
Due to such scams, stock markets face huge crashes thereby affecting the economy in a big way. This causes a slowdown in economic growth often leading to weakening of the economy and often disappearance foreign investment. This run-away causes foreign portfolio investors to look for other viable options to invest and nurture their money in a place or economy they see more trustful.
Often scams revolves around individuals making such deposits to the bank, solely to churn their black money into white. Sometimes, banks give away loans to individuals/institutions way above the paying capacity. Such actions often prove to be detrimental to the banks in the long run. Similarly, associate business executives fraudulently wire cash to a private account at an associate offshore bank and it takes a bank month or perhaps longer to track the missing funds.
Once banks start to fall, this leads to a greater effect on the economy. The economic impact caused by the economy is wide-ranging and it affects a lot the normal lives of the people. Often, this leads to a shift in the trust from the banks to other monetary means. Thus, the most important factor in the ‘death’ of YES bank is the trust factor which has declined from the bank. Thus, it has affected millions of people in India and major players who tied-up with this bank in their journey. In the rescue State Bank of India gave it a lifeline by bailing out YES bank and buying a significant share of stake in the bank. This has been a major significant step in the banking sector to revive a major commercial bank and to regain the trust of the people and its customers on the bank and the banking sector.
Though banks and banking scams might not be new but repercussions of a scam are widespread these days. Earlier, limited number of people, mostly the rich, had dealing with the bank but in the past one or two decades, banking services have also been availed by even the poorest of the poor in India. Thus, when a bank scam is discovered or a bank collapses, the whole public sentiment goes down with it.