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 16^th century.

2)      Origin of banknote:

In the early 17^th 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 17^th century.

4)      Issue of cheque books

About the middle of 18^th 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.