Banking institutions serve as financial intermediaries from "summary" of Economics of Money, Banking and Financial Markets, Business School by Frederic S. Mishkin
Banking institutions play a crucial role in the economy by acting as financial intermediaries. Their primary function is to facilitate the flow of funds between savers and borrowers. Savers deposit their money with banks, which, in turn, lend that money to individuals and businesses seeking funds. This process allows savers to earn interest on their deposits while providing borrowers with access to much-needed capital for investment or consumption. By serving as financial intermediaries, banks help to channel funds from those who have excess funds to those who need funds for various purposes. Without banks, savers would have to directly lend their money to borrowers, which can be inefficient and risky. Banks help to mitigate these risks by pooling deposits from many savers and diversifying their lending activities across a wide range ...
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