The role of banking system in the economy can be explained under the following headings.
1) Mobilisation of savings
The banks encourage thriftiness and save more among people. The men can be free of the future anxity when do not have income on account of savings.
2) Capital Formation
The capital formation is crucial for the economic development of a country. The less developed countries likes Nepal are suffering from low capital formation. The bank collects idle money from people.
3) Promotion of Employment
The unemployment is a serious problem, which may result into severe social political and economic consequences. In Nepal, pressure of population on land is high. A large share of labour force is unemployed and under employed. The bank helps to relieve the economy from the pressure of unemployent. The banks provides loans to business, entrepreneurs and farmer in different forms.
4) Upliftment of poor
The banks make available loans to rural people on reasonable rate of interest. This helps farmers to understand agricultural and non agricultural works. The small farmer development project, small sectors development programme, small and cottage industries project, micro credit project have been implement by agricultural development bank and commercial bank in Nepal for the upliftment of the poor.