Question

Why are financial intermediaries important. suggest innovative ways financial institutions can generate additional income in the face of declining interest income

Answer 1

Financial intermediaries are important because they will be channelizing the funds from the savers to the borrowers and they will be ensuring adequate credit availability in the economy and they will also look for maintenance of the higher liquidity in the economy so they will be enhancing a better economic scenario by adaptation of better financial system which will accommodate for higher liquidity and credit availability.

When there will be a decrease in the interest income for these financial intermediaries,then they can increase their revenues through additional charges upon these consumers for using of their facilities and they can place various kinds of additional bonus facilities which will be utilised by the consumers and they are also offering discount schemes and they can also get in association with various other financial companies and they can also advertise through it so these financial intermediaries can generate higher amount of income in case their income lowered and they will be offering with the various innovative facilities. they can enter into the brokerage facility and they can also provide with the assistance which will be technical assistance regarding maintenance of the following so they will be offering additional facilities and there will not be enough income generation through interest.