Banking Notes for XII Chapter 1 Origin of Banking

“Banking” Notes for XII Chapter “1” “Origin of Banking”
“Banking”  Notes for XII Chapter “1” “Origin of Banking”

“Short Question Answer”

Q1) Define Banking?

According to Kinley

ANS: A bank is an institution that provides loans to people according to their financial needs and safety and the people trust to keep their money with them when they do not need it.

An establishment which makes to individuals such advances of money, or other means of payment, as may be required and safely made and to which individuals entrust money or the mean of payment when not required for use by them.

Q2) Define the origin of Banking?

Origin of Banking

ANS: It is very difficult to trace out the exact origin of Banks. It is said that the evolution of the Banking Business is as old as the concept of money. Crowther says that the present-day banker has three ancestors:

1) Merchants,

2) Money lenders,

3) Goldsmiths.

A modern bank is something of these. It is believed that people started keeping deposits of valuables and jewelry. Bank charged a certain amount from the depositors for the services. Modern banks are performing the same functions as performed by the goldsmiths and money lenders of older days. Therefore it is believed that goldsmiths and moneylenders are the ancestors of banks.

Long Question/Answer

Q1) Write the Banking history of Pakistan?

Banking History of Pakistan

ANS) In Pakistan banking sector was created with the setting up of the Habib Bank in 1947, which was shifted to Karachi from Bombay, Muslim Commercial Bank in 1948, and from Calcutta to Chittagong. After the partition of the subcontinent Reserve Bank of India assumed the responsibility of performing central banking functions in Pakistan Subsequently, the functions were taken over by the state bank of Pakistan. Which was organized in July 1948. It’s one of the main feats was the rescue of the Bank of Bahawalpur which had gone on the brink of bankruptcy. The salvage by the state Bank wrote a glittering history of banking stability in Pakistan.

In July 1974, all commercial banks were nationalized, and In August 1991, their privatization started. In the late 80s private-sector banking was allowed.

Q2) Describe the origin and evaluation of Modern Banking?

The Origin and Evaluation of Modern Banking

A form of business organization that is established as a joint stock company or corporation for the purpose of dealing in money to solve financial problems by the circulation of accumulated or deposited money in public is called Modern Banking.

Origin and Background of Banking

When people started to save precious metals like gold, silver, and their ornaments and started to save their deposits to the prominent and powerful person of society. After this some people were totally involved in the process of keeping the deposits of public and it became a business. Many trustworthy keepers of deposits started to keep the deposits from public with conditions and interest. When money started to use as a source of exchange, people began to deposit money to these persons, thus their trustworthy keepers started to borrow money from people with an agreement of their profit and the period of returning the deposited money. Keepers also started to land money to other needy persons which they had been borrowed at a higher rate of interest. They also started to pay interest at a low rate on deposited money. The process of Banking was started and the concept of banking started to grow In which Merchants, Money landers, and goldsmiths played a very important roles.

Evolution and Growth of Modern Banking

Modern Banking is not the result of an accident but it was started because of man’s increasing demands and needs. Three parties or sectors of society played a very important role for the evolution and growth of Modern Banking.

The Process of Modern Banking

In the middle of 12th century, the banking sector started to grow in Italy. In the city of Venice, the first formal bank was established in 1157 named “Bank of Venice”. After that, another bank was set up in 1587, named “Bank of Banco di Riatto” in Genoa. According to modern banking experts, the first modern bank was established in 1964, in England, named “Bank of England”. In Europe, the banks comprising the function of accepting deposits and transferring money were formed at different times. German public bank was established in 1401. The first bank was established in India named “Bank of India”. After this many other banks were established in Madras and Calcutta. In 1946 there was only 93 scheduled banks were working in India having 3106 branches in all over India.

At the time of partition banking sector of Pakistan was in miserable condition but with the passage of time, it grew very rapidly. At the time of partition, there were only 487 branches of scheduled banks in west Pakistan, which reduce to 81 in June 1948. Quaid-e-Azam Muhammad Ali Jinnah inaugurated the state bank of Pakistan on July 1 1948, As the Central Bank of Pakistan started to create a national Banking System in Pakistan. National Bank was established in 1949. The process of privatization of commercial banks was started in August 1991 which is continuing till now.