MODERN BANGKING
Modern
banking operations are basically to ease the movement of goods across the
political boundary of countries. Banking system came beside with the
enlargement of money as an institution. As civilization narrowed downward
the social distances and mankind learned about the remuneration of exchanging
commodities athwart political boundaries, the present day international trade
developed. The business of commodities across countries necessary
financial intermediation in the international stage and thus modern banking
system was born. The banking system is a crucially important and vital part of
the in general economy. By, encouraging saving, and through the allocation of
savings to borrowers, the financial system plays a key role in the investment
procedure, which is a major determinant of the economy growth and future
productive aptitude. Escalation the financial sector is a vital concern for an
economy. Efficient banking or sound financial system provide as an effective
channel for mobilizing funds from savers to productive segment and thus helps
to achieve economic growth.
In today’s world no country can afford to do business without
whichever in the field of international trade or in international banking.
Since international trade is directly correlated to modern banking, quantity of
international trade (imports and exports together) is a determinant of the
growth of modern banking and the relationship is direct. This research paper
discuss about the definition of bank, history of banking system, the structure
of modern banking systems and importance of banking system in global aspect.
2.1 Definition of Bank:
The
word ‘Bank’ was
perhaps imitative from the word ‘bench[1]‘ as during ancient time Jews used to do money lending business
sitting on long benches. A bank[2] can be defined in terms of the economic functions it serves,
the services it offers its customers and the legal basis for its existence.
According to Geoffrey “A dealer in debts- his own & of others people”. And
Sir John Paget “ No person or body, corporate or otherwise, can be a banker who
does not (1) take deposit accounts, (2) take current accounts, (3) issues &
pay cheques, & (4) collect cheques, crossed & uncrossed, for his
customers. Bank is a lawful organization, which recognizes deposits that can be
withdrawn on demand. It also lends money to persons and business houses that want
it. The actions carried on by banks are called banking activity. ‘Banking’ as
an activity engages recognition of deposits and lending or investment of money.
It makes possible business activities by providing money and definite services
that help in exchange of goods and services. Therefore, banking is a
significant supplementary to trade. It not only provides money for the
production of goods and services but also assist their exchange between the
buyer and seller.
History of banking
system:
Banking
activities were adequately important in Babylonia in the second millennium B.C.
that written standards of practice were considered necessary. These standards
were part of the Code of Hammurabi the earliest known formal laws. Obviously,
these primitive banking transactions were very different in many ways to their
modern-day counterparts. Deposits were not of money but of cattle, grain or
other crops and eventually precious metals. Nevertheless, some of the basic
concepts underlying today’s banking system were present in these ancient
arrangements, however. A wide range of deposits was accepted, loans were
made, and borrowers paid interest to lenders. Similar banking type arrangements
could also be found in ancient Egypt. These arrangements stemmed from the
requirement that grain harvests be stored in centralized state warehouses.
Depositors could use written orders for the withdrawal of a certain quantity of
grain as a means of payment. This system worked so well that it continued
to exist even after private banks dealing in coinage and precious metals were
established.
The
modern banking is to practices in the Medieval Italian cities of Florence,
Venice and Genoa. The Italian bankers made loans to princes, to finance wars
and their lavish lifestyles, and to merchants engaged in international trade.
In fact, these early banks tended to be set up by trading families as a part of
their more general business activities. The Bardi and Peruzzi families were
dominant in Florence in the 14th century and established
branches in other parts of Europe to facilitate their trading activities. Perhaps
the most famous of the medieval Italian banks was the Medici bank, set up by
Giovanni Medici in 1397[5]http://people.brandeis.edu/~cecchett/Textbook
inserts/A Brief History of Banking.htm – _ftn4. The Medici had a long
history as money changers, but it was Giovanni who moved the business from a
green-covered table in the market place into the hall of a palace he had built
for himself. He expanded the scope of the business and established branches of
the bank as far north as London. While the Medici bank extended the usual loans
to merchants and royals, it also enjoyed the distinction of being the main
banker for the Pope. Papal business earned higher profits for the bank
than any of its other activities and was the main driving force behind the
establishment of branches in other Italian cities and across Europe.
During
the 17th and 18th centuries the Dutch and
British improved upon Italian banking techniques. A key development often
credited to the London goldsmiths around this time was the adoption of
fractional reserve banking[6]. By the middle of the 17th century, the civil
war had resulted in the demise of the goldsmith’s traditional business of
making objects of gold and silver. Forced to find a way to make a living, and
have the means to safely store precious metal, they turned to accepting deposits
of precious metals for safekeeping. The goldsmith would then issue a receipt
for the deposit. At first, these receipts circulated as form of money.
But eventually, the goldsmiths realized that, since not all of the depositors
would demand their gold and silver all together, they could issue more receipts
than they had metal in their vault.
The structure of modern banking system:
The
banking systems of the world have many similarities, but they also differ,
sometimes in relatively material respects. The principal differences are in the
particulars of organization and technique. The differences are less because of
the growing efficiency of international communication and the development in
each country to replicate practices that have been successful elsewhere.
Banking systems may be classified in terms of their structure basis.
my
opinion about this article
Modern
banking same should another bank but this modern banking services, more
sophisticated in it money storage transactions financial management all in do
with a computerized system
by mega hariani
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