Banking and it's relation to types of economies- A comparative scrutiny

Prathamesh Rajesh Dhake; Kirti - -

Banking and it's relation to types of economies- A comparative scrutiny

Author(s)	Mr. Prathamesh Rajesh Dhake, Ms. Kirti - -
Country	India
Abstract	Abstract The banking sector has long been regarded as one of the most important pillars supporting the economic development of a country. By mobilizing savings, providing credit, and facilitating financial transactions, banks help channel financial resources into productive economic activities. Over time, economists and policymakers have debated the extent to which the development of banking systems directly contributes to economic growth. While conventional economic thought suggests that stronger and more efficient banking institutions stimulate investment and expansion of businesses, recent financial crises and structural differences between economies indicate that this relationship may not always be straightforward. This paper examines the role of banking sector development in influencing economic growth through a comparative perspective of developing and developed economies. It explores whether the expansion of banking systems consistently supports economic growth or whether, in some circumstances, rapid credit expansion may contribute to financial instability. The study also considers whether developing economies rely more heavily on banks for financing economic activity compared to developed economies, where capital markets and alternative financial institutions are often more established. In addition, the paper evaluates whether initiatives aimed at expanding access to banking services actually translate into long-term economic progress. By analysing economic trends, financial access, and patterns of credit allocation across different economic contexts, the paper aims to provide a balanced understanding of how banking systems interact with broader economic structures. In many developing economies, banks remain the primary channel through which individuals and businesses access financial services, making their development particularly significant for entrepreneurship, small enterprise growth, and infrastructure investment. In contrast, developed economies typically operate within more diversified financial systems where multiple financial institutions contribute to economic activity. The paper ultimately argues that while banking sector development plays a crucial role in economic progress, its effectiveness depends on sound regulation, financial inclusion policies, and the broader institutional framework within which banks operate.
Keywords	Financial Inclusion; Banking Sector; Economic Growth; Digital Financial Services; NBFCs; Inclusive Finance; Public Policy, Banking sysetm and its relation to types of economies
Field	Sociology > Administration / Law / Management
Published In	Volume 8, Issue 2, March-April 2026
Published On	2026-03-19

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Banking and it's relation to types of economies- A comparative scrutiny

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