Development of Banking System

Certainly, no comparison can be made between ancient and modern banks, yet it is necessary to know how the present banking system gradually developed. In ancient times, goldsmiths, businessmen, and moneylenders used to perform the work of banking in every country. Hence, Crowther has described the following persons are the ancestors of modern banks

The Merchants

The oldest ancestors of the modern banks were merchants. The merchants used to exchange gold, silver coins and deposit the valuable ornaments or goods made of gold, silver, and gems. The receipt (written document as proof) given by them was considered equivalent money. They had played a vital role to develop the banking transaction.

The Money Lenders

The moneylenders were the second ancestors of modern banks. Lending and borrowing are almost as old as a moneylender, are found even in quite primitive communities. He is not usually regarded as a, very lovely object the user is one of the oldest terms of abuse. But the service he performs is undoubtedly useful and necessary, even though the reward he extracts in return may usually be rapacious.

The Goldsmiths

The goldsmiths were the third ancestors of the modern banks. Noted economist Hartley Withers has taken the ancient goldsmiths as the father of the modern banks. The goldsmiths used to give receipts, which were known as Goldsmith's Note. It was made payable to the bearer and on-demand which transformed the said receipt into the position of a banknote. It gained circulation and currency in the due course of time. These notes with time became payable to bearer on demand and enjoyed circulation. Thus we can say that the goldsmiths became the precursor of the modern banknote and the forerunners of the modern banking institutions. Hence, the banks started to carry out the works of creating the credit, issuing the notes, depositing, lending, transacting the bills of exchange and promissory notes, etc.

The history of banking development, we cannot forget the bank of Casa de San Giorgio in Genoa, was established in 1148; Bank of Venice was established in 1157, and Bank of Genoa was established in 1148. In 1401, the Bank of Barcelona was established in Barcelona. In fact, the modern bank started to take rapid speed informing and functioning from the 17th century. During this period, the Bank of Milan, Bank of Florence, and Bank of St. George were established in Genoa. In 1609, the Bank of Amsterdam was established in Holland, likewise in 1610, the bank of Hamburg was established in Germany and the Bank of England was established in England. In the context of Nepal, for the first time, the Nepal Bank Limited was established in 1994 (1938) and the Central Bank of Nepal (Nepal Rastra Bank) was established in 2013 (1957).

In conclusion, we can say that banking is not static but a dynamic concept. It is a product of centuries and the development which has taken place is the product of a method of trial and error and experiences which were made and the results that followed relating to the acceptance of money and valuables as deposits, keeping them as such, lending the, whether to private individuals, to states or other bodies and for controlling the multifarious and multi-dimensional activities which, in the beginning, were only trivial and could be ignored but with the growth of time, become international in character and multi-dimensional in nature calling for actions on the part of the states as the actions on the part of the individuals failed and state control the became eminent.

Thus, one cannot understand the development of banking by looking at a particular period of time and one has to consider the development by taking into account the progress it has taken during the centuries and by understanding the movement from one stage to the other.

From the above-given facts, it is clear that present banking has come to this position passing the vicissitude from the past.