History

History

 

Banking is one of the most important services in financial sector. It also provides fuel for economic growth of a country. It offers safety and liquidity for the investors. Banks are the principal source of credit for dealers, households, small businesses like retail traders and large business houses. Efficiency of a bank depends on their ability to satisfy their investors by offering comparatively a better interest rate to depositors and at the same time offering credit to their borrowers comparatively at cheaper interest rates. With a narrow interest rate spread (difference between borrowing and lending rate), they should make profit also.

Looking into the present profile of a bank, it has grown up phenomenally offering large number of products other than the traditional functions of accepting deposits and lending funds. It is worth analyzing the historic background of evolution of banking services. When and how the banks appeared? Linguistics (the science of language) and etymology (the study of origin of words) suggest an interesting story about the origin of banking. Both the old French word ' banque' and the Italian word ' banca' were used centuries ago to mean a 'bench' or 'money changers table'. This describes quite well what historians have observed concerning the first bankers who lived more than 2000 years ago. They were money changers situated usually at a table or in a small shop in the commercial district aiding travelers who came to town by exchanging foreign coins for local money or discounting commercial notes1 for a fee in order to supply merchants with working capital.