Role of Non-banking Financial Intermediaries/ Institutions

Contents

Role of Non-banking Financial Intermediaries/ Institutions

Role of non-banking financial intermediaries can be explained as under:

1. Helpful for Business: Non-banking financial intermediaries provide assistance to non-financial business sector by purchasing bonds, shares, debentures etc. They provide facility in the investment of plant, equipment etc.

2. NBFIs Reduce Hoarding: NBFIs reduce the hoarding of cash in the hands of money savers.

3. Help Household Sector: NBFIs encourage the habit of savings and investment in the public in generic.

4. Provide Facility of Liquidity: Non-banking financial intermediaries provide facility of liquidity. They provide short-term loan and make diversities in the debts.

5. Mobilisation of Savings: Non-banking financial intermediaries receive large part of public savings. Some non-banking financial institutions are depository intermediaries and some are contractual intermediaries. Pension fund, life insurance companies and public public provident funds are contractual intermediaries.

Both depository intermediaries and contractual intermediaries are helpful in collecting the public savings.

6. Creation of New Assets and Liabilities: Non-banking financial intermediaries are helpful in creating the new assets and liabilities. It also increases the welfare.

7. Advantages to the Economy: Non-banking financial intermediaries encourage the affairs of financial markets, implementation of monetary and credit policies of central bank and thus it motivates to the development of economy.

8. Other Roles of Non-Banking Financial Institutions: These are as under :