The Historical Development of Banking Business


A bank is a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either directly or indirectly through capital markets.

Origin of the word Bank:

As early as 2000 B.C. Babylonians had developed a system of banks. According to some economists— the Word bank has been derived from the German word “BANC” which means in joint stock firm. Others says that —derived from an Italian word “BANCO” which means heap or mound. Some people also believed that the Word bank has derived from the word “BANQUE” which means Bank in English.

— The bank of Venice established in 1157 supposed to be the most ancient bank.

Definition of Bank By Different Authors:

Crowder says— a bank is a dealer in his own and others.

John Harry says—  Bank is a economic institution whose main aim is to earn profit through exchange of money and credit instrument.

Historical development of Banking business:

The bank of Venice founded in Italy in 1157 was the first public banking institution. Originally it was not a bank in the modern sense.

 The bank of Amsterdam was established in 1609. lt was one of the greatest Bank of the 17th century. Most of European banks now in existence were formed on the model of the bank of Amsterdam.

 The goldsmith mainly functioned in England of 17th century. They used to received gold and silver for safe custody and receipt issued by them.

The bank of England was established in 1694 in England. But the development of modern commercial banking institution was started only when banking act of 1833 was passed.

In 19th century that the modern joint stock commercial banking system developed in most of the leading countries of the world.

After the partition of British India in 1947 the Pakistan established the State Bank of Pakistan in 1st July 1948.

After the emergence of Bangladesh in 1971 the Bangladesh Bank was established in 1972 which is the successor Bank of the State bank of Pakistan.

Evaluation :

Now-a- days the banking institutions become an important and the part of the life of people. There are various views about the origin of the word bank. One view is that it was derived from an Italian word “BANCO”. Another is German word “BANC”. So it has not so far been decided to how the word bank originated.

Conclusion :

In simple words the bank is a financial institution, and its main two works are to deposit and lending money. But according to Section: 7 of the banking Companies Act 1991 it has many works to do without these. But the origin of the word bank does not ensured by the authors.