ICom Notes Class 12 Banking Introductions to Banking, Origin, Word "Bank"

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INTRODUCTION TO BANKING

Banking

The term bank or banking is one of those terms that are increasingly being used in business language. With growing importance of the financial sector of a country. Bank are considered to be the major role players.

DEFINITION

A bank is an institution that deals in money. But this definition does not cover all the aspects of banking business as it includes all persons dealing in money, which is not true to be more perfect we can say that

“A bank is an organized house which borrows money from the people for the sake of providing loan or services of monetary nature to businessmen or need person.”

EXPLANATION

An institution that accepts money of the people or organizations in the form of deposits and does its business is called a bank. Banking system of a country refers to the working process followed by the banking institutions. It is identify through the relationship between the apex bank.

Origin of Banking

It is very difficult to trace out the exact origin of banks. It is said that the evolution of banking business is as old as the concept of money. Crowther in his book AN OUTLINE OF MONEY says that the present day banker has three ancestors merchants, money lenders and gold smiths. A modern bank is something of these. It is believed that goldsmiths and grocers of primitive days started keeping deposits of valuables and jewelleries people on the basis of their sound financial position in the community. They charged a certain amount from the depositors for the services rendered in keeping and preserving the valuables in safe custody. But they soon realized that only a small portion of metal and valuable deposited were taken bark by the people even at the expiry of the stipulated period. They therefore began to make profit by lending a part of these deposits. In case of lending, it was not always gold or silver, but issued their receipts which would pass among the people as if they were gold just like cheques in modern banks. The present day banks are performing the same functions as performed by the money lenders and goldsmiths of older days. Therefore it is believed that goldsmiths and moneylenders are the ancestors of banks.

Word “BANK”

The derivation of the world Bank has been differently given by different authors. Same authors think that the word “BANK” has been derived from the Italian word “BANCHI” or “BANCHERII”. The payable used in Italian Business Houses. Some believe that it is derived from the German word “BANCK” meaning heap or mounds. The first public bank of Venice established on 1157 is considered as the first ever Public Bank.