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Online Course
Module 2

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Vol. 1.1-4n4

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Module 2
The Story of Banking
Duration: 30 Mins

Vol. 1.1-4n4

www.funancialquest.com Module 2: The Story of Banking

Contents
•What is a Bank?
•Origin of the word
•History of Banking
•Goldsmiths of London
•Banking in India
•Reserve Bank of India
•Channels of Banking
•Services offered in a Bank

Vol. 1.1-4n4



Vol. 1.1-4n4


•What is a Bank?
•Origin of the word
•History of Banking
•Goldsmiths of London
•Banking in India
•Reserve Bank of India
•Channels of Banking
•Services offered in a Bank

Vol. 1.1-4n4


What is a Bank?

We have seen banks all around but what are they really?

A bank is a financial institution that accepts money deposits and uses those
deposits to lend money to others. A bank is the connection between customers
who have extra money and customers who need extra money.

Banks charge interest when they lend money and pay interest to the depositors.

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Origin of the word.

We have seen banks all around but what are they really?

The word bank was borrowed from from Old Italian and German Language word,
banc, which meant "bench". Benches were used as desks or exchange counters
during the Renaissance Period by Florentine bankers, who used to make their
transactions atop these benches.

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Origin of the word.

The Indian Connection

Another possible origin of the word is from the Sanskrit words ( ) 'byaya'
(expense) and 'onka' (calculation) = byaya-onka. This word still survives in Bangla,
which is one of Sanskrit's child languages. + = . Such expense
calculations were the biggest part of mathematical treatises written by Indian
mathematicians as early as 500 B.C.

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The History of Banking

How it all Started…

Wealth in the earlier days was deposited and kept in temples also called
thêsaurus (treasure houses), where it was assumed that the Gods would
safeguard it from theft. Thus, the Old Temples were the earliest forms of banks
and were almost exclusively used by the rulers and kings.
In ancient India there is evidence of Banking Activities taking place like loans
from the Vedic period (Around 1000 BC). During the Buddhist period, there was
considerable use of these instruments. Merchants in large towns gave letters of
credit to one another.
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The Goldsmiths of London

How a group of Artisans became early Bankers

London in the earlier days was the centre of global finance. The main bankers in
London were originally Goldsmiths, who over the years had transformed from
being simple artisans to depositories of Gold and Silver Holdings.

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The Goldsmiths of London

How a group of Artisans became early Bankers

Goldsmiths had money that they had no immediate use for, and they began lending
it out at interest to merchants and governments. Finding more profits in Lending
business, Goldsmiths began soliciting for more deposits and started offering
interest to depositors. This became the basis for modern banking as we know it.
The first bank in the world was established in Venice in 1157.
After second world war, the banking system internationally was brought under
Bretton Woods system in 1944. It also led to the creation of two organizations, The
International Monetary Fund (IMF) and the World Bank.
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Banking in India

How the Banks Started in India

Banking in India originated in the last decades first banks were The General Bank
of India, which started in 1786, and Bank of Hindustan, which started in 1770

The first entirely Indian joint stock bank was the Oudh Commercial Bank,
established in 1881 in Faizabad.

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Banking in India

How the Banks Started in India

The oldest bank in existence in India is the State Bank of India, which originated in
the Bank of Calcutta in June 1806, which almost immediately became the Bank of
Bengal. This was one of the three presidency banks, the other two being the Bank
of Bombay and the Bank of Madras, all three of which were established under
charters from the British East India Company. For many years the Presidency
banks acted as quasi-central banks, as did their successors. The three banks
merged in 1921 to form the Imperial Bank of India, which, upon India's
independence, became the State Bank of India in 1955.
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The Reserve Bank of India

What is the Importance of RBI in India

Today, all banks in India are regulated under the central bank which is called the
Reserve Bank of India (RBI). Among many rights enjoyed by RBI, the main are as
follows:
-Bank of Issue: RBI has the sole right to issue bank notes of all denominations
-Monetary Authority: RBI acts as the main monetary authority and functions as the
bank for National and State Governments.
-Regulator and Supervisor: RBI acts as the chief regulator of economic activities
in India
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Channels of Banking

The different channels through which Banks provide their services.

Banks today, offer many different channels to access their banking and other
services:
•Automated Teller Machines (ATM)
•A Bank Branch
•Call Center
•Mail: Most banks accept cheque deposits via mail and use mail to communicate
to their customers, e.g. by sending out statements

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Channels of Banking


•Mobile banking is a method of using one's mobile phone to conduct banking
transactions
•Online banking is a term used for performing multiple transactions, payments
etc. over the Internet
•Relationship Managers, mostly for private banking or business banking, often
visiting customers at their homes or businesses

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Channels of Banking


•Telephone banking is a service which allows its customers to perform
transactions over the telephone with automated attendant or when requested with
telephone operator
•Video banking is a term used for performing banking transactions or professional
banking consultations via a remote video and audio connection. Video banking
can be performed via purpose built banking transaction machines (similar to an
Automated teller machine), or via a video conference enabled bank branch
clarification
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Services offered by a Bank
•CURRENT ACCOUNT
•SAVINGS ACCOUNT
•CERTIFICATE OF DEPOSIT

Some of the services offered by a Bank include

•Current Account: A bank account which allows for unlimited withdrawals and
deposits. This account does not earn interest. This type of account is generally
used by companies and business organisations.
•Savings Account: A bank account where customers deposit their savings and
earn interest on their deposits.
•Certificate of Deposit (CD): A certificate from the bank which states that a
deposit of a certain amount has been made. This document sometimes is used as
a guarantee of payment in business transaction.
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•FIXED DEPOSITS
•CREDIT CARD


•Fixed Deposits (FD): Fixed Deposit schemes let customers deposit a fixed amount
monthly (or weekly, quarterly). FD earns a higher interest, but depositors are not
allowed to withdraw before a certain period of time agreed earlier (like one year).
•Credit Card: A card which identifies the customer and her relationship with a
bank and lets her buy an Item on credit. The payment for the item purchased is
done by the Bank and the user is asked to return the money to the bank before a
deadline. Credit cards are used extensively for online transactions.

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•DEBIT CARD
•PERSONAL LOAN


•Debit card: A Debit card looks similar to a credit card and has similar functions.
The difference being the cost of the item bought from a Debit Card is deducted
from the customers bank account immediately. Generally, a debit card also
functions as an ATM Card.
•Personal loan: A personal loan is an amount borrowed by individuals from a bank
which has to be return within a certain period with an extra interest. People
generally take a personal loan to buy items of personal and home use like Cars,
Jewellery etc.
Vol. 1.1-4n4


-End of Module 2-
When ready, test your knowledge
and receive a score!
Note: The test contains 10 Objective Type Questions to be finished in 10 mins duration.

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