HISTORY OF BANK

INTRODUCTION:
Banking is the business activity of accepting and safeguarding money owned by other
individuals and entities, and then lending out this money in order to earn a profit. The banking
also includes issuance of debit and credit cards, providing safe custody of valuable items,
lockers, ATM services and online transfer of funds across the country or world. It is well said
that banking plays a silent, yet crucial part in economy. The banking activity encourages the flow
of money to productive use and investments. This is turn allows the economy to grow. A banking
system also referred as a system provided by the bank which offers cash management services
for customers, reporting the transactions of their accounts and portfolios. The banking system
should not only be hassle free but it should be able to meet the new challenges posed by
the technology and any other external and internal factors. The banks also offer investment and
insurance products. As a variety of models for cooperation and integration among finance
industries have emerged, some of the traditional distinctions between banks, insurance
companies, and securities firms have diminished. In spite of these changes, banks continue to
maintain and perform their primary role—accepting deposits and lending funds from these
deposits.
Definitions of Banks:
“A bank is a person or corporation which holds itself out to receive from the public, deposits
payable on demand by cheque.” ----- Walter Leaf
“Bank as a manufacture of credit and a machine for facilitating exchange.”
----- Horace White
“A Bank is a financial institution which accepts money from the public for the purpose of
lending or investment repayable on demand or otherwise with drawable by cheques, drafts or
order or otherwise.” ---- Banking Companies Act of India

Bank is a business of accepting deposits and lending money. It is carried out by financial
intermediaries, which performs the functions of safeguarding deposits and providing loans to the
public.
Banking Company: Any company, which transacts the business of banking.

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HISTORY OF BANKING:

The history of banking depends on the history of money—and on grain-money and food cattle
money used from at least 9000 BC. The history of banking begins with the first prototype banks
of merchants of the ancient world, which made grain loans to farmers and traders who carried
goods between cities. This began around 2000 BC in Assyria and Babylonia. Later, in ancient
Greece and during the Roman Empire, lenders based in temples made loans and added two
important innovations: they accepted deposits and changed money.
During the early periods, although the banking business was mostly done by private individuals,
many countries established public banks either for the purpose of facilitating commerce or to
serve the Government. The bank of Venice, established in 1157, is supposed to be the most
ancient bank. Originally, it was not a bank in the modern sense, being simply an office for the
transfer of the public debt. Banking, in the modern sense of the word, can be traced to medieval
Renaissance Italy, to the rich cities in the north such as Florence, Venice and Genoa. The
Bardi and Peruzzi families dominated banking in 14th century Florence, establishing branches
in many other parts of Europe. Perhaps the most famous Italian bank was the Medici bank,
established by Giovanni
Medici in 1397. The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in
Siena, Italy, which has been operating continuously since 1472.
As early as 1349, the business of banking was carried on by the drapers of Barcelona. There it
was subject to official regulation. The drapers were not allowed to commence this business until
they had given sufficient security. During 1401, a public bank was established in Barcelona. It
used to exchange money, receive deposits and discount bills of exchange, both for the citizens
and for the foreigners. During 1407, the bank of Genoa was established. The development of
banking spread from northern Italy throughout the Roman Empire, and in the 15th and 16th
century to northern Europe. During the 20th century, developments in telecommunications and
computing caused major changes to banks' operations and let banks dramatically increase in size
and geographic spread.

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Characteristics of banking
 Dealing in Money
 Individual / Firm / Company
 Acceptance of Deposit
 Giving Advances
 Payment and Withdrawal
 Agency and Utility Services
 Profit and Service Orientation
 Ever increasing Functions
 Connecting Link
 Banking Business

Types of banking:
 Savings bank
 Commercial banks
 Industrial banks or development banks
 Land development banks or agricultural banks
 Central/federal/ national banks
 Cooperative banks
 exchange bank

Savings bank
Saving Banks are established to create saving
habit among the people.
• These banks are helpful for salaried people and
low income groups.
• The deposits collected from customers are
invested in bonds, securities etc.

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Commercial banks
Commercial banks are established with an objective to help businessman.
• These banks collect money from general public.
• It give short-term loans to businessmen by way of cash-credits, over drafts etc.
• It provide various services like
• collecting cheques,
• bill of exchange,
• remittance money from one place to another place.

Industrial banks
These banks collect cash by issuing shares and debentures.
• It provide long-term loans to industries.
• The main objective of these banks is to provide
• long-term loans for expansion and
• modernisation of industries
Provides loans and fixed capital to industries concerns.
• Provide long- term loans and credits for periods varying 5 – 15 years for
industries to acquire fixed assets.
• They Finance infrastructural developmental activities like construction of transport facilities,
building of power supply stations, etc.
Land development banks or agricultural banks
Land mortgage of land development banks are
also known as Agricultural Banks.
• These are formed to finance agricultural sector.
• It also help in land development.
Central/federal/ national banks
Every country of the world has a Central bank.
In India, RBI

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 In USA, Federal Reserve
In UK, Bank of England
• These central banks are the bankers of the other
banks.
It provide specialised functions i.e.
Issue of paper currency
Working as bankers of government,
Supervising and controlling foreign exchange.
• A Central Bank is a non-profit making
institution.
• It does not deal with the public, it deals with
other banks.
Cooperative Banks
Cooperative Banks are registered under the Cooperative Societies Act, 1912.
• It give credit facilities to small framers, salaried
employees, small-scale industries etc.
• These banks are available in rural as well as
urban areas.

Exchange bank
Deal in foreign bills of exchange import and export of bullion.
• Do incidental services like opening of letters of credit, issue of Foreign currency Drafts and
Travelers' cheque , supply of information about foreign customers.
• Provide credit and loans and also accept Deposits in Foreign currency.
• Require huge capital and trained staff.
• Maintain branches in foreign countries.
• As per Foreign Exchange Regulation Act banks dealing in Foreign Exchange require
permission from RBI.

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