Introduction to Overview of Banking

Origin & Growth of Commercial Banking

Crowther mentions that there are three ancestors of the modern commercial banking ther merchant, the moneylender and the goldsmiths. The merchants or the traders issued documents like hundi to remit the funds, which took the form of cheques or demand drafts in the modern day banking. Moneylenders gave loans while goldsmiths received deposits and created credit. Modern banks give loans and accept deposits and also facilitate issuing of cheques and demand drafts. In short, the evolution of commercial banking is related to the practice of safe keeping of gold and other valuables with merchants/goldmiths/moneylenders.
1.

What is a Bank? The word bank is derived from the Greek word banque or the Italian word banco both meaning a bench at which moneylenders and moneychangers used to display their coins and transact their business in the market places. A bank is a profit seeking firm dealing in money and credit. It accepts deposits and keeps it under safe custody.

Definition of Commercial Banks : The Banking Regulation Act 1949, defines Banking as accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise.

What is a Scheduled Bank?

Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act.

These banks enjoy certain privileges such as free concessional remittances facilities and financial accommodation from the RBI. They also have certain obligations like minimum cash reserve ratio (CRR) to be kept with the RBI. Some co-operative banks are scheduled commercial banks albeit not all co-operative banks are.

Section 6 of the Banking Regulation Act lists the following activities as those in which a Banking company may engage in : 1. Main Functions : Borrowing / Raising / Taking of Deposits Lending or Advancing of Money
A. B.

C.

Corporate Credit Retail Credit Consumer Credit Non-fund based Credit LC/ Guarantee

2.

Agency Services

Acting as agents to Government / Local Authority / Any other

3.

persons / Corporate To act as executors / trustees Other Businesses Collection Remittances Foreign Exchange Business

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5. 6.

General utility Services : Safe Deposit Lockers Demat Service Cash Management Service Capital Market related activities Electronic Banking Services Delivery Channels Anywhere / Online Banking ATM Phone / Mobile Banking Credit Cards / Debit Cards Call Centres