Module 1

Introduction to Banking

Prof. Nijumon K John, Christ University, Bangalore

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

Prof. Nijumon K John, Christ University, Bangalore

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

Prof. Nijumon K John, Christ University, Bangalore

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

Prof. Nijumon K John, Christ University, Bangalore

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

Charles-II in 1640 by rejected sanction of loans – Ruined Goldsmiths

Led to growth of Private Banking – Bank of England established in 1694

Prof. Nijumon K John, Christ University, Bangalore

Contd… 19th Century – Modern joint stock

commercial banks were developed in most of leading countries

In India – 1850 – Joint stock companies act was passed

PNB in 1895 & People’s Bank in 1901 Post independence 1949 – Banking

regulation act

Prof. Nijumon K John, Christ University, Bangalore

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

Prof. Nijumon K John, Christ University, Bangalore

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

Prof. Nijumon K John, Christ University, Bangalore