Question: Define Bank. Discuss the origin and evolution of bank.
Origin 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 means bench. The
explanation for this word has been related to the fact that the Jews transacted
their 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 work ‘bank’ is derived from the German word ‘back’
which means ‘joint stock fund’. Later on Germans occupied major part of Italy and
the word ‘back’ was Italianized into ‘bank’.
Evolution of
banking:
The history
of banking starts almost at the same time the human civilization started. Natives
of Iraq operated banking in 2000 BC in their 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 and then different banks were set up in
different countries. The evolution of banking passed through different stages
which a given below.
1. To 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 began to issue receipts
which were accepted as title of money. These receipts were also called ‘hundi’
in subcontinent and were the first mode of payments.
2. The Goldsmiths
The second stage in the growth of banks 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 note” became a
medium of exchange and medium of payment.
3. The Moneylenders
The third stage in the development of banking
arose when the goldsmiths became the moneylenders. The goldsmiths began to keep
a small portion of the total deposits for meeting the demands of their customers
and lent the rest. This allowed depositors to draw over and above the amount that
they had actually deposited. In economic terminology, they allowed the facility
of overdraft to their customers. Receiving of deposits an allowing overdraft
facility arose the following functions in banking:
STAGES OF EVOLUTION OF MODERN MONEY
The following are the evolutionary
steps of modern money:
1) Receiving deposits:
The goldsmiths of England began to receive deposits of money in the last
year of 16th century.
2) Origin of banknote:
In the early 17th century, the deposit receipts or the notes
issued by the goldsmiths began to circulate as money.
3) Origin of cheque:
The issue of cheques began in the second half of the 17th
century.
4) Issue of cheque books
About
the middle of 18th century the goldsmith bankers began to issue
printed cheque forms.
Conclusion:
In the present banking has undergone a lot of changes and
there has been great expansion in the functions of banks. Today every country
of the world has its own banking system.
