Evolution of Banking
The history of banking evolution is very interesting. In the early ages human like and wealth was not secure. Due to fear of loot-mar and theft people buried their wealth under land but this method was not satisfied. People started to search the custodians of wealth. The evolution of banking started and it has crossed the following stages.
First Stage of Evolution.
After a great struggle people succeeded in finding the reliable persons to deposit their money and valuable goods for safety. These people were goldsmiths. These were considered the most trusted persons due to their sounds financial position. On the other hand they had a very strong iron safes for keeping gold, money and other valuable items. People started depositing their gold and cash in the safe of goldsmiths.
Goldsmiths charged something for this purpose and they returned the depositors their money whenever they needed banking evolution and goldsmith were the early bankers.
Second Stage.
During this period those receipts which were issued by the goldsmiths against the valuables goods were being used as a medium of exchange by the merchants. People purchased the various things from the traders against their receipts against the payments. So the receipts were used like the bank cheque of the modern age.
Third stage of Evolution.
This period started at that time when goldsmiths came to know by the experience that people are using their receipts as medium exchange and very few people demand their deposits. So they reach to the conclusion that they may lend some pro9tion of their total deposits to some other people and they can earn profit. Goldsmith started the business of lending. They also started paying interest to attract the depositors of net cash. Now this business became very profitable, so the traders and money lenders also jumped in this field.
Fourth Stage of Evolution.
It was started at that tie when people were tempted to deposit more and more cash to the traders, money lenders and goldsmiths to earn maximum interest. On other hand number of borrowers also increased borrowing the money. So for the borrowing and lending business regular institutions came in to being.
In the present age bank is modernized shape of those institutions. But to earn more profit every bank started issuing overdraft facility without maintaining adequate cash reserves to meet the demands of the depositors. This inability created the financial crises. Now to maintain the good will of the banks perform their duties. All the commercial banks perform their duties keeping in view the instructions of the Central Bank.
Keeping in view the above discussion about the evolution of bank we can say that it is the result of the different activity of goldsmiths, merchants and money lenders. They are the real founders of modern banking business. All the basic functions of modern bank like accepting are similar with the founders. Now with the changing business requirements the secondary functions of banks have been changing with the passage of time.
