Module 1

Introduction to Banking
Meaning
 Derived from German word “Banco”
means accumulation of securities or
money with a joint stock firm.
 Later became “Bank”
 Also derived from greek word
“Banque” means bench
 Bank of venice – ancient bank in
1157
Evolution
 As old as civilization – 2000 BC
 Babylonians had developed.
 Temples – place of lending & deposits
 Priests – finl agents
 Jews were handling this banking
 Christians treated it as sin , however by
13th century they slowly got into it
 Banking also existed in vedic age – scripts
of ramayan & mahabharath – handled by
vaish community
Contd…
 Initially – Bank of venice in Italy –
limited to some families
 Activities were limited to lending &
deposits only
 Later 1401- Bank of Barcilona in
Spain
 1407 – Bank of Geneva
 1609 – Bank of amsterdam
Contd…
 In London, Banking started with Goldsmiths
during queen of Elizabeth-I
 Receive customers valuables inturn for
funds for safety custody
 The receipts became the bearer forms
inturn
 Ill treatement during Government of of
Charles-II in 1640 by rejected sanction of
loans – Ruined Goldsmiths
 Led to growth of Private Banking – Bank of
England established in 1694
Contd…
 19th Century – Modern joint stock
commercial banks were developed in most
of leading countries
 In India – 1850 – Joint stock companies act
was passed
 Oudh commercial bank – 1st Bank
 Followed by PNB in 1895 & People’s Bank in
1901
 Post independence 1949 – Banking
regulation act
Classification of Banks
Based on Operations
 Savings Bank- Reservior for small &
scattered savings of the community. E.g.
Post office savings bank, commercial
savings Banks
 Agricultural Bank : Provides credit to
agriculture. E.g. Cooperative Banks, Rural
banks
 Exchange Banks : Finances foreign trades
of country in various currencies. E.g. Major
commercial Banks
Contd…
 Central Banks : Banker’s Bank ,Controller
of Credit & monopoly of issuing currency
notes on behalf of Govt. E.g. RBI
 Industrial Banks :Meets long term capital
requirements of Industry. E.g. Industrial
Finance Corp of India - IFCI,IDBI
 Commercial Banks : Means of providing
short-term credit to trade & commerce.
 Post SBI/Companies act 1969, Commercial
banks have revolutionised by offering
services to agriculture, SSI & other weaker
section of the economy