MEANING OF BANK

Bank is s financial institution that uses money deposited by customer for investment, pays it out when required and provides loans at interest. The work ‘bank’ is generally understood to mean commercial bank, an institution which deposits money and provides loans of various kinds. Because the history of banking system evolved through the commercial bank, it captures the wider sense of under standing when we talk about bank. However, meaning of bank is not limited to commercial bank. We will discuss the various types of banks in the following sections. The history of bank dates bank to the seventh century and is related to goldsmith who possessed strong safe vaults where the valuable goods like gold, silver and diamond could be kept safely. People used to deposit their precious goods with goldsmith and use it for paying their deposits. With the deposit of valuable goods like gold, silver and diamond the depositors, especially the rich merchants, could make the transfer of his assets required to pay for the other persons by written order to the goldsmith. This practice gradually developed as the system of payments through cheque. The good realized that they could earn interest by lending the deposited gold and silver, which was used as money, with them to the needy people. Thus, the goldsmith used to receive valuables from their customers for safe custody and issue receipts acknowledging the same. Latter on these receipts became payable to barer on demand and enjoyed considerable circulation. Thus, the modern bank notes evolved though the goldsmith’ receipts and their safe vault became the precursor of modern commercial bank. The modern commercial banking started after the establishment of the bank of England in 1694.