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Chapter 8
BANKING
‘Bank 'is usually used in the sense of commercial bank.
Bank seems to have originated from the Germanic word ‘bank’—joint stock fund or heap.
French word ‘banque’and the Italian word ‘banco’
HISTORY OF BANKING
The Italian word banco refers to a bench at which the money changers used to change one kind of money into another
The first public banking –the Bank of Venice
(1157)
The bank of Barcelona and the Bank of Venice –1401 and 1407 respectively.
Exchange banking was developed after the installation of the Bank of Amsterdam in 1609 and Bank of Hamburg in 1690.
The credit of laying the foundation of modern banking in england goes to the Lombards of Italy
The bankers of lombardy –money lending business in england
The bank of England -1694The development of joint stock commercial
banking started functioning in 1833.Modern banking developed in 19th century.In India ,the first modern bank ‘bank of
Bengal’ in 1806
Central bank Commercial bank
Apex institution of the monetary and banking system
It is only a constituent unit of the banking system
Monopoly of note issue Do not have this right
Not profit making institution ,but to promote economic policy of the government.
It is to earn profit for the shareholders
It maintain foreign exchange of the country
It deals with foreign exchange under the guidance of central bank
It is the advisor, banker to the government
It is the banker, advisor to the public
distinguish between central and commercial bank
R.B.I Governor
Regulator of currencyBanker ,agent and adviser to governmentCustodian of cash reserves of commercial
banksCustodian and management of foreign
exchange reservesLeader of the last resortClearing functionController of credit
Function of central bank
Bank rateOpen market operationVariable reserve ratio
Qualitative /selective credit controlMargin requirementsRegulation of consumer creditRationing of creditDirect actionMoral suasionpublicity
Quantative credit control
Accepting or attracting depositsa).saving depositsb)demand depositsc)fixed depositsAdvancing loansa)cash creditb)provision of overdraft facilitiesc)discounting bills of exchangeAdvancing funtion
Functions of commercial banks
Creation of money for credit• Other function transfer of funds Agency function General utility services
Safty lockers Letter of credit Under writing loans Compiling statistics
Any questions
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Thank
you
S.madan kumar
M.A.,M.A.,B.Ed.,M.Phil.,M.B.A.