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BANKS PROMOTE CAPITAL FORMATION FOR
MERCHANT ACCOUNT HOLDERS
In any Merchant Account, capital
occupies a position of crucial and
strategic importance. The bank plays an
important role in removing the
deficiency of capital by stimulating
savings and investments. A sound banking
system helps in mobilisation of the
savings of the merchants and makes them
available for investment in productive
merchandise industries. No economic
development of sizeable extent in
merchant account is possible unless
there is sufficient degree of capital
formation.
Capital is must in all businesses.
Capital is also considered as life-blood
of any business. Banks help a lot in
pushing up small business to a certain
height by giving financial help and also
by promoting capital formation. There
are other non-banking financial
institutions that also provide monetary
help. But these financial institutions
charge a higher rate of interest than
the banks. Merchant account is
maintained with lots of withdrawals and
deposits and also various other
transactions. Credit card processing is
an example of a merchant account. In
modern days, going to the bank for
making transactions like withdrawal is
eliminated. These services are replaced
by e-commerce and electronic banking
systems. Internet is used as a main
medium for such kind of transactions.
But it is also important to visit banks
sometimes to make deposits into the
respective account.
Merchant account is accessed at any time
of the day. A high level of
technological support is needed in the
background. Merchants usually accept
credit cards to receive payments from
the customers. Banks perform two
important functions in the capital
formation of merchant account holders.
They are: (a) Banks attract deposits by
offering attractive rates of interests
and thus converting savings which would
have remained as immobile capital into
active capital; and (b) The banks
distribute these savings through loans
amongst the merchant account holders
which are directly or indirectly
connected to economic development. Bank
plays an important role in encouraging
savings and making merchandise business
stand firmly in the poorest market
situations. The merchants also find
satisfaction in the offers provided by
the banks. This improves the bank and
merchant relationship.
It is the customer who saves hardly 5
percent of the national income. The more
savings are done, the more capital
formation improvises. To secure a
reasonable level of development, the
common people should save at least 12
percent of the national income. A small
rate of saving does not permit large
investment in merchant accounting
system. A merchant should always be
ready to face even the worst situation
that may come in the economy which is
very uncertain and un-predictable in
nature. Banks also act as a backbone to
any monetary terms and dealings. The
banks provide financial assistance in
the establishment of various businesses.
It is difficult to see how, in the
absence of banks, small merchandise
business of various merchants could be
made possible or mobilised. The capital
deficiencies in any merchant account are
the serious handicaps in the development
of any economy. These deficits in
financing of the merchant business are
covered up by the banks. Thus banks
helps in promoting capital formation for
merchant account holders. |
