The Central Banking Operations in Global Economy

Economic Function Of Banking Sector

Banking system constitutes the foundation of the economy with the functions like collecting the savings as loans and returning back into the economy, ensures the distribution of resources. In liberal systems that are dominated by monetary economy, according to the Keynesian view, one of the most important functions of money is to use money as a mean of saving. So that, every person in society and all parts of society can make savings. In modern banking operations, acceptance of deposits comes first at the activities of banks based on loan transactions. Even if deposits divided into deposits of public organization, deposits of commercial organization and deposits between banks according to investment patterns of individuals, basically it is said to be there are term deposits and demand deposits (Barda,1967: 165; O’Neill, 2001: 8-12). Not being idle of funds in the existing economic system and transferring these funds to those who are in need of investment is the most important element in the smooth functioning of the system. Credit marketing, directly or indirectly takes place in the economic system. Direct method consists of selling papers that you have on the market to those who seek funding. However, in indirect method, those in need of funds can reach the fund they wish thanks to financial intermediaries. In this method, while the saver, who has fund in the hands, transfers funds to the agent, for those who want to use credit also consults the agent. Process takes place in a safe way that sellers and buyers will not come face to face each other thanks to agent(Mishkin, 1992:10-39; Woods, 2000: 78-88).