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In: Finance

What crucial role do financial intermediaries perform in an economy?

What crucial role do financial intermediaries perform in an economy?

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Expert Solution

Financial Intermediaries such as banks, Mutual Funds, credit unions and Insurance companies refers to the firms,comapanies that facilitates finacial transactions between two parties. Main purpose of financial Intermediaries is to channelise Savings into investments.

CRUCIAL ROLES PERFORMED BY FINANCIAL INTERMEDIARIES-

1) Banks provides storage facility for storage of cash and other precious metals such as gold, silver and bullions.

2) Providing short term as well as long term loans to Individuals/companies . They accept deposits from intermediaries and then lend them as loan to those in need.

3) The biggest role of financial intermediaries is to channelise savings into Investments. These Investments are further used for promoting development of a nation.

4) Intermediaries such as Mutual funds and Insurance companies assists their clients in growing their money through appropriate investment schemes.

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