How much does the economy of a country depend on its banking system?

Banking sector is the backbone of Indian economy and the total economy control and monetored by RBI Its true.

Considering India.Villages are backbone of india. And Rural population is higher in the country.There are still people who never knew what banks are.People like this still store their money in pots for safety.Institutional facilities are lacking in most of the regions.Though many schemes were introduced in many 5 year plans 100 % results are not yet achieved.The money like this will never be circulated and is of no use for economy of a country.If people are made aware of banking system all the huge amounts of money will be deposited and circulated, will be much more helpful for economy.Jan dhan yojana main aim is to open an account for every individual. RBI supreme of all banks decides reporate ,reverese reporates and plays a vital role in controlling inflation. Hence when the interest rates reduce people take lot of loans lot of money will be in market but if interest rates are much lower ,then automatically the commodity prices increase.This is only an increase due to inflation whereas real value remains the same.This never increases purchasing power of people.So banking system is all which decides inflation,purchasing power of people,value of rupee internationally.Sometimes rupee value is decreased deliberately simply to increase our exports so that our products have more demand.

India is the country which stand second in terms of importing gold. This is a dead investment and of no ue for countrys economy. Gold monetisation schemes are introduced to liquif the gold investment but were not very successfull.

Conclusion.Every year huge amount of money will be invested in printing currency.If institutional credit increases and every individual transacts digitally theres alot banks can save.Banks can make Economy one or None.Digital literacy is not yet achieved if achieved banks will be key to Economy.

To a great extent; noting that macroeconomic tools used to drive the output are fiscal and monetary policies. The latter is highly dependent on the banking system and more precisely the central bank. The banking system determines an interest rate based on money demand, liquidity and saving patterns so as to promote investment or selling governmental bonds through which the whole aggregate output is advanced.