History of Banking.Banking has been present in different forms right from the beginning of human life. About three thousand years ago, there was a nation called “Sumerian” who started giving loans to the people. These loans were repayable in form of cash or commodities. Sumerian used lumps of gold and silver as money. For the first time, the banks were established in Venice and Genoa in 12th & 14th century. In 14th century, a modem bank was set up in Florence where the banks accept the deposits from people in order to relent the needy.
History of Banking Over Time
According to banking experts, the business of banking started in Iraq and then shifted to Rome and Greece. But, the banking business came to an end after the fall of Roman Empire and then again began to flourish in Italy and other countries of Europe. With the passage of time, the banking business expanded to America, Asia and other countries of the world.
- BANKING IN IRAQ:
During two thousand years B.C., the tradition of banking was developed in Iraq. The king Hammurabi (1728-1686 B.C) the founder of Babylonian Empire, laid down standard rules for banking operation. He described legal provisions in writing for giving loans and mud cakes were
used for loan agreements. Rate of interest on these advances was 33.3% P.a. Granted loans were transferable and people were also well aware of with the concept of B/E. That was the time when the business of money and letter of credit started taking place in the cities of Iraq. Later (during 5th century B.C.), the banking business came to an end in Iraq, because the Jews have been put to exile and most of them went to Greece.
- BANKING IN GREECE:
Banking reached Greece from Iraq and made great progress in the 4th Century B.C. In old ages, there was a tradition in Greece of giving loan on interest basis and here temples served as earliest banks. The temples of Epheusus and Delphi were the biggest banks of their time. In 594 B.C., a scholar, named Solaran, revised the procedure of giving loans on interest basis.
- BANKING IN ROME:
The business of banking was carried on in Rome in 3rd century B.C. The trade and banking business made a rapid growth in Rome after the settlement Jewish traders. In 14 B.C. (During the reign of Augeston II), an institution was established in Rome, which started to accept deposits and lent money to the needy people. After the fall of Roman Empire the Jewish traders shifted to Europe.
- BANKING IN ITALY:
In the middle of 12th century, the banking sector started to grow in Italy. In the city of Venice, first formal bank was established in 1157 named “Bank of Venice”. After that another bank was set up in 1587 named “Banco di Rialto” in Genoa. In the beginning, the banks of Italy were used to transact foreign exchange.
- BANKING IN EUROPE:
In Europe, the banks comprising the functions of accepting deposits and transferring money were formed or established at different times named German Public Bank (1401), Bank of Barcelona (1401), Bank of Genoa (1407), Bank of Amsterdam-Holland (1609) and Bank of Hamburg-Germany (1690). William III set up a bank in England in 1694 named Bank of England. It was the first bank, which got the sole authority gf issuing currency notes in 1758.
- BANKING IN SUB-CONTINENT:
It is very much evident that during 2000 B.C., there was a developed banking system in the sub-continent, which was mostly managed by sahukars or moneylenders. It is also notable that during this period, institutions carried on the banking business. Muhammad Tughlaq was the first king who introduced token currency in India. He issued metal coins and currency notes from Royal Mint. Later, Mughal rulers and ShershahSuri further streamlined this system. There is also sufficient evidence that during the fifth century people used Hundies as credit instrument. The modem banking in India was started with the establishment of Bank of Calcutta in 1806. In 1809 it was redesigned as Bank of Bengal. After this, Bank of Bombay (In 1840) and Bank of Madras (In 1843) were formed. These three banks remained at the apex of modem banking till their amalgamation as Imperial Bank of India in 1921, which became the State Bank of India in 1955. The Bank of India was founded in 1906 with paid up capital of Rs. 50 lakh. Reserve Bank of India was established as the first Central Bank of India in 1935. In 1946 there was only 93 scheduled banks were working in India having 3106 branches in all over the India.
- BANKING IN PAKISTAN:
At the time of partition banking sector of Pakistan was in miserable condition but with passage of time it grew very rapidly. At the time of partition, there were 631 branches of scheduled banks in Pakistan (487 in West Pakistan & 144 in East Pakistan). But just after the independence, India started the political and financial confrontation. Most of the banks transferred their offices to India. Up to 30th June 1948 the offices and branches of scheduled banks in Pakistan reduced to 195 (81 in West Pakistan & 114 in East Pakistan). State Bank of Pakistan was established on first July 1948 inaugurated by Quaid-i-Azam Muhammad Ali Jinnah. National Bank of Pakistan was established on 8th November, 1949.
STAGES OF EVOLUTION”
The modem banking is not the result of an accident rather it is initiated because of man’s increasing demands and needs. Following parties or sectors of society played a vital role for the establishment of Bank. They are considered “Ancestors” of banks due to their contributions in the development of banking system.
