Evolution of Banking
It has not so far been decided as to how the word 'Bank' originated. Some authors suggest that this word has been derived from the word Bancus' or 'Banque' which mean a bench. The explanation of this word has been related to the fact that the jews transacted the business of money exchange on benches in the market-place; and when the business failed the 'Bancus' was destroyed by the people. Incidentally the word 'Bankrupt' is said to have been evolved from this practice. Other authorities hold the opinion that the word 'Bank' is derived form the German word 'bane which means a Joint Stock fund. Later on the Germans occupied the major part of Italy and the word Banc was Italianized into "Bank".
Growth of Banking
The exchange of banking is as old as human history. Natives of Iraq operated Banking in 2000 BC in temples. This system was also introduced in Rome but it was not successful. Passing through different tides a State bank was formed with the name Of "Banco di Rialto" in Geneva in 1587. The Bank of Amsterdam was setup in 1609 & then different banks in different countries were setup. The history of banking passed through different stages which are explained below:
1. THE MERCHANTS The earliest stage in the growth of bank can be traced to the working of merchants. These merchants were traders in commodities. It was risky for the traders to carry metallic money with themselves for payment The traders with high reputation begin issue receipts which were accepted as title of money. These receipts were also called hundi in Sub continent and were the first mode of payments.
2. THE GOLDSMITHS The second stage in the growth of banking is normally traced to earlier goldsmiths. These goldsmiths used to receive gold and silver for safe custody. The goldsmiths began to issue receipts for the metallic money kept with them. These receipts with the passage of time became payable to the bearer on demand. Consequently the Goldsmith became a medium of exchange and a mean of payment.
3. THE MONEYLENDER The third stage in the development of banking arose when the goldsmiths became the money, lenders. The goldsmiths began to keep a small portion of the total deposits for meeting the demand of customers and lent the rest. This allowed the depositors to draw over and above the amount actually standing to their credit. In economic terminology, they allowed overdraft facility. Receiving of deposit and allowing overdraft facility arose following function of modern banking:
a) Payment of interest
The moneylender began to compete for deposits and this lead to the practice of paying interest on deposit.
b) Origin of Cheque
In the second half of 17th century, particularly towards the end of it, customers were allowed to issue cheques for withdrawing deposited money & loans.
c) Issue of Cheque book
In the middle of 18th century, goldsmith bankers began to issue printed cheque forms and b/w 1770-75, a clearing house was established in "Bank of England."
CONCLUSION In the present century banking has undergone expansion in the functions of banks. Today every country of the world has its own banking system.
It has not so far been decided as to how the word 'Bank' originated. Some authors suggest that this word has been derived from the word Bancus' or 'Banque' which mean a bench. The explanation of this word has been related to the fact that the jews transacted the business of money exchange on benches in the market-place; and when the business failed the 'Bancus' was destroyed by the people. Incidentally the word 'Bankrupt' is said to have been evolved from this practice. Other authorities hold the opinion that the word 'Bank' is derived form the German word 'bane which means a Joint Stock fund. Later on the Germans occupied the major part of Italy and the word Banc was Italianized into "Bank".
Growth of Banking
The exchange of banking is as old as human history. Natives of Iraq operated Banking in 2000 BC in temples. This system was also introduced in Rome but it was not successful. Passing through different tides a State bank was formed with the name Of "Banco di Rialto" in Geneva in 1587. The Bank of Amsterdam was setup in 1609 & then different banks in different countries were setup. The history of banking passed through different stages which are explained below:
1. THE MERCHANTS The earliest stage in the growth of bank can be traced to the working of merchants. These merchants were traders in commodities. It was risky for the traders to carry metallic money with themselves for payment The traders with high reputation begin issue receipts which were accepted as title of money. These receipts were also called hundi in Sub continent and were the first mode of payments.
2. THE GOLDSMITHS The second stage in the growth of banking is normally traced to earlier goldsmiths. These goldsmiths used to receive gold and silver for safe custody. The goldsmiths began to issue receipts for the metallic money kept with them. These receipts with the passage of time became payable to the bearer on demand. Consequently the Goldsmith became a medium of exchange and a mean of payment.
3. THE MONEYLENDER The third stage in the development of banking arose when the goldsmiths became the money, lenders. The goldsmiths began to keep a small portion of the total deposits for meeting the demand of customers and lent the rest. This allowed the depositors to draw over and above the amount actually standing to their credit. In economic terminology, they allowed overdraft facility. Receiving of deposit and allowing overdraft facility arose following function of modern banking:
a) Payment of interest
The moneylender began to compete for deposits and this lead to the practice of paying interest on deposit.
b) Origin of Cheque
In the second half of 17th century, particularly towards the end of it, customers were allowed to issue cheques for withdrawing deposited money & loans.
c) Issue of Cheque book
In the middle of 18th century, goldsmith bankers began to issue printed cheque forms and b/w 1770-75, a clearing house was established in "Bank of England."
CONCLUSION In the present century banking has undergone expansion in the functions of banks. Today every country of the world has its own banking system.
