History of banking

The word bank is referred to a bench for keeping, lending, and exchanging of money or coins in
the market place by money lenders and money changers. The word bank is used in the sense of
commercial bank.

Foundation of modern banking was laid in early 2000 B.C in the temple of Babylon where safe-
keeping was practiced. The names of two bankers are written in Jain scriptures, who built the
famous Dilware Temple of Mount Abu during 1197 and 1247 A.D.

The first bank called the Bank of Venice which was built in Venice, Italy in 1157 to facilitate
monarch in his war. However the modern banking began after 1640 by English goldsmiths. In
1770 the first bank in India was established known as Bank of Hindustan in Calcutta by
Alexander & Co. but was failed and closed in 1782. In modern sense the first bank was
established in 1806, bank of Bengal, in the Bengal presidency.

Banking system was first evolved by merchant banker who used to trade commodities. Their
trading activities required remittances of money from one place to another by issuing receipts
which was called Hundis. In india such bankers were known as seths.

Gradually the goldsmiths started lending money on behalf of depositor to public. This was the
advancement in system of banking. Goldsmiths lend money and charge interest and issue
promissory notes. As a safeguard, they keep some money in the reserve. So goldsmith became
the bankers, who started to practice modern banking, which accepted deposits and gave loans.

In 1695, bank of England was first to start permanent issue of bank notes. In 1728, bank of
Scotland introduced the facility of overdraft.

Banks have come a long way from the temples of the ancient world, but their basic business
practices have not changed. They may have advanced and provided services on internet but the
primary functions of the banks still exist.