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Commercial Banking

Commercial Banking



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Published by: api-3716588 on Oct 18, 2008
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Chapter 3
Evolution & Origin of Banking
Evolution & Ori
gin of Banking
\ue000The word bank is used in the sense of a commercial
\ue000The word bank has a German origin though some

people believe that it has come from a French word \u2018Banqui\u2019 and yet others believe that it has come from the Italian word \u2018Banca\u2019. Whatever it is, it referred to a bench for keeping , lending and exchanging of money or coins in the market place by money lenders and money changers.

\ue000There was no such word as banking before 1640,

although the practice of safe keeping and savings flourished in the temples of Babylon as early as 2000 BC.

\ue000In India also reference of banking system could be
found in the ancient Jain Temples and literary works
like that of Chanakya etc.
\ue000The first bank called the \u2018Bank of Venice\u2019 was established in Venice,
Italy in 1157 to finance the monarch in this wars.
\ue000The bankers of Lombardy were famous in England, but modern
banking began with the English Goldsmiths only after 1640.
\ue000The First Bank in India was Bank of Hindustan started in 1770 by
Alexender and Co.
\ue000But the first bank in modern sense was established in the Bengal
Presidency as the Bank of Bengal in 1806.
\ue000It was merchant bankers who first evolved the system of banking by

trading in commodities than in money. Their trading activities required the remittance of money from one place to another. For this they issued \u2018hundis\u2019 to remit funds. In India such merchants were known as \u2018SETHS\u2019

\ue000The next stage in the growth of banking was the \u2018goldsmith\u2019 His

business was such that he had to take special precaution against theft of gold and jewelry and if he seemed to be an honest person merchants and neighbours started leaving their bullion, money and ornaments in his care. As this practice spread the goldsmiths started charging something. As an evidence for receiving valuables he issued a receipt \u2013 these acted like cheques and were used as a medium of exchange. The GSm also lending money (Coins of G& Silver) as not all of them were demanded back at the same time.

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