Bank:

A bank is a financial institution and financial intermediary, a dealer in loans and debt that
accepts deposits and channels those deposits into lending activities, either directly by loaning or
indirectly through capital markets. It is an institution and it creates the connection between
customers by collecting the unutilized money of the people and to lend to others.
Banks act as payment agents by conducting checking or current accounts for customers,
paying cheques drawn by customers on the bank, and collecting cheques deposited to customers'
current accounts. It borrows money by accepting funds deposited on current accounts, by
accepting term deposits, and by issuing debt securities such as banknotes and bond. It lends
money by making advances to customers on current accounts, by making installment loans, and
by investing in marketable debt securities and other forms of money lending. Banks provide
different payment services, and a bank account is considered indispensable by most businesses
and individuals. The interest derived from lending and depositing is the main source of funding
of the banking institutions. It can generate revenue in a variety of different ways including
interest, transaction fees and financial advice. The bank profits from the difference between the
level of interest it pays for deposits and other sources of funds, and the level of interest it charges
in its lending activities.

Evolution of Banking Institutions:

There seems to be no conformity along with the economists about the derivation of the word
‘bank’. According to some economists, the word ‘Bank’ has been derived from the German word
‘BANC’ which means a joint stock firm. While others say that it has been derived from the
Italian word ‘BANCO’ which means a heap. Perhaps the word ‘Banc’ or ‘Banco’ was used by
Italians to denote the accumulation of securities or money with a joint stock firm which later on
with the passage of time came to be known as‘Bank’. There is still another group of people who
believe that the word ‘Bank’ has been derived from the Greek word ‘BANQUE’ which means a
bench. However, the first view of the origin of the ‘Bank’ from the words ‘Banc’ or ‘Banco’
seems to be more convincing since it was used in the establishment of the bank of Venice which
is supposed to be the most ancient bank in the world for starting the meaningful activities
efficiently.

The business of banking is as old as civilization itself. Since early as 2000 BC, Babylonians had
developed a developed a system of banks. They used their temples for lending at higher rates of
interest against gold and silver which had been left with them for safe custody. Around the same
time, the Greek temples were used as depositories for people’s surplus funds and these were the
centers of money lending transactions. The priests of the temples acted as agents till they lost
public confidence on account of people’s disbelief in religion.

However, during this period, banking was mainly confined to money-lending activities which
were largely in the hands of the Jews. The Christians were forbidden by their religion to lend
money on interest since it was considered to be sinful activity. However, with the passage of
time, the hold of the church on the Christians weakened and with the development of process of
trade and commerce around the 13thcentury, the Christians also started money lending business..
In the initial stages, the banking largely meant money-lending and it was restricted toselected

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number of families working as sole proprietary firms. All these banks accepted the deposits
which could be drawn or demand on transferred from the account of one person to another.
In England, the development of banking business can mainly be attributed to the London
Goldsmiths. They used to receive their customers valuables and funds for safe custody. The
business of Goldsmith suffered a rude set back as a result of the ill treatment. The Goldsmiths
used to deposits their funds in the exchequers with the sanction. However after the ruining
of Goldsmiths, it proved a turning point in the history of English banking. It led to the growth of
private banking.

Geoffrey Crothers, a noted economist has identified three ancestors of the present day banker.
These are:
 The merchant,
 The money-lender and
 The goldsmith.

The merchant developed because of his high and widespread reputation on credit. They were
able to collect money from their customers and issue documents that were accepted as “titles of
money”.
The money-lender usually conducted business with his own money. Later, they also started
accepting money from clients when they found it profitable to borrow at low interest rates and
lend it as higher interest rates.
The Goldsmiths which functioned mostly in England received gold and silver for safe custody
and the receipts issued by them acknowledging the same were initially used for withdrawals of
the deposits made with them. These receipts with passage of time became payable to the bearer
on demand and enjoyed considerable circulation. In this way, the ‘goldsmith’ note becomes the
fore-runner of modern bank note.
Thus, in a way the goldsmiths can rightly be termed as the fore-runners of the modern banking
institutions. It was only in the 19thcentury that the modern joint stock commercial banking
system developed in most of the leading countries, including enactment of laws and regulations
to govern the Banking business.

Though the banking business in its naïve form was in operation since ancient times the banking
in its present form is of recent origin. So the evolution of banking institutions concerned with a
large time. Here the evolution of banking institutions is given in below in shortly.
1. Introduction of money and bank: Money is the mother of bank. Banks created the money
more speedy and meaningful. From the past time when money comes the evolution of banking
institutions was started.
2. Introduction of money lending business and bank: After introducing the money it
introduces the lending business. By lending money what amount of interest the loan giver take
make it more continuous to create the banking system.
3. Evolution of civilization and bank: The business activity and economic activity were
increases as the evolution of civilization as well as it makes the way for creating bank for doing
the performance efficiently. The some important ideas are given in below:

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Mesopotamia: Banking as understood as in an archaic state is thought to have begun during a
period as early as the second part of the fourth millennia to as late as the third to second
millennia BC.

Egypt: About the time of the 18th century BC amounts of gold were deposited within the
boundaries of the temple buildings of Egypt for reasons of security. In Egypt from early times,
the numerous scattered government granaries were transformed into a network of grain banks,
centralized in Alexandria where the main accounts from all the state granary banks were
recorded. This centralized administration was the first known governmental bank functioning as
a trade credit system that transferred payments between accounts without passing money.
Documents made to show the banking of taxes were known as pep token-records.

India: In ancient india there is evidence from the Vedic period (beginning 1750 BC. Later
during the Maurya dynasty (321 to 185 BC), an instrument called Ayesha was in use, which was
an order on a banker desiring him to pay the money of the note to a third person, which
corresponds to the definition of a bill of exchange as we understand it today. During the
Buddhist period, there was considerable use of these instruments. Merchants in large towns gave
letters of credit to one another.

China: In ancient China, starting in the Qin Dynsty (221 to 206 BC), chinese currency
developed with the introduction of standardized coins that allowed easier trade across China, and
led to development of letters of credit. These letters were issued by merchants who acted in ways
that today we would understand as banks.

Greece: In Greece banking institutions are evaluated by

Money Changing:

Ancient Grecian bankers were in the first case moneychangers and pawnbrokers, present in the
marketplace or festival sites, changing coinage of foreign merchants into the local currency.

Palace and temple banking

Private and civic entities within ancient Grecian society; especially Greek temples performed
financial transactions. These consisted of deposits, currency exchange, validation of coinage, and
loans.
Loans
Many loans are recorded in writings from the classical age, although a very small proportion was
provided by banks. Provision of these was likely an occurrence of Athens, with loans known to
have been provided at some time at an annual interest of 12%. Within the boundaries of Athens,
bankers’ loans are recorded as having been issued on eleven occasion’s altogether.
4. Development of business and bank: For increasing the knowledge and experience of
business activities the development of banking activities also increased. At the end of the middle
age, for the increasing of the business , it increased the huge amount of notes. Under the helped
of the government it helped to develop the modern bank.

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The evolution of banking institutions concerned with many years from when it started its
activity. It enlarges its activity by following civilization. Some important Ancient Banks are
given in bellow from the earliest time when the activities of the bank are started.

Name of bank Place Year of starting

Shansi Bank China B.C.600

Bank of Venice Italy 1157

Bank of San Georgio Genève 1178

Bank of Barcelona Italy 1401

Riks Bank of Sweden Sweden 1656

Bank of England United kingdom 1694

Central Bank of India India 1785

Bank of France France 1800

Bank of Japan Japan 1882

Federal Reserve System United states 1913

Imperial Bank of India India 1920

Reserve Bank of India India 1935

Bangladesh Bank Dhaka 1971

So the evolution of banking institutions is very old like human civilization. First of all we must
note the fact that these institutions have changed very much in character since their origin, and
consequently nowadays perform many functions unknown to those of former times. As a result
of innovation and legal and regulatory changes, banking institutions have evolved in a way that
invites us to question whether it revolves around banks anymore. That’s why Harold Oualgren
said “The what of banking has not changed, merely as much as how”

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