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Ch 4 Commercial Banking part 1

Ch 4 Commercial Banking part 1

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Published by SoumyojjwalDatta

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Published by: SoumyojjwalDatta on Aug 11, 2011
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Evolution & Origin of CommercialEvolution & Origin of CommercialBankingBanking
The word bank is used in the sense of a
The word bank has a German origin though somepeople believe that it has come from a French word‘Banqui’ and yet others believe that it has come fromthe Italian word ‘Banca’. Whatever it is, it referred to abench for keeping , lending and exchanging of moneyor coins in the market place by money lenders andmoney changers.
There was no such word as banking before 1640,although the practice of safe keeping and savingsflourished in the temples of Babylon as early as 2000BC.
In India also reference of banking system could befound in the ancient Jain Temples and literary works likethat of Chanakya etc.
The first bank called the ‘Bank of Venice’ was established in Venice, Italyin 1157 to finance the monarch in this wars.
The bankers of Lombardy were famous in England, but modern bankingbegan with the English Goldsmiths only after 1640.
The First Bank in India was Bank of Hindustan started in 1770 by Alexender and Co.
But the first bank in modern sense was established in the BengalPresidency as the Bank of Bengal in 1806.
It was merchant bankers who first evolved the system of banking bytrading in commodities than in money. Their trading activities required theremittance of money from one place to another. For this they issued‘hundis’ to remit funds. In India such merchants were known as ‘SETHS’
The next stage in the growth of banking was the ‘goldsmith’ His businesswas such that he had to take special precaution against theft of gold and jewelry and if he seemed to be an honest person merchants andneighbours started leaving their bullion, money and ornaments in his care.As this practice spread the goldsmiths started charging something. As anevidence for receiving valuables he issued a receipt – these acted likecheques and were used as a medium of exchange. The GSm alsolending money (Coins of G& Silver) as not all of them were demandedback at the same time.

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