April 05, 2017

History of Banking

April 05, 2017
If we see the history, we will come to know that there was no proper management for money.  A man felt insecure for saving his money. First, he buried his savings underground. But this practice was not good enough. As a result, he deposited his savings with the strong persons who hired armed guards on wages. Thus this practice moved to widely accepted business, which gives rise to the idea to lend the deposited money.

In this way, persons who receive deposits earned income from two sources, from depositors and from borrowers. In the banking development there is a great service of group of three persons.


1. Money lenders.
2. Merchants.
3. Goldsmith.

Moneylender: A person who offers small personal loans at high interest.

Merchants: A person who buys and sells goods for profit.

Goldsmith: A person who makes or sells articles of gold.

Following is the history of banking.

Banking History of Italy

The bank of Venice is the first bank of the banking history. This bank was established in Venice (City of Italy) in 1157. Different countries in the world followed the footsteps of this bank to establish banking system in their countries.

Banking History of England

In England people deposited their money with Goldsmiths for safety. The Goldsmiths started lend the deposited for a high rate of interest. They also paid interest to those people who deposited their money to attract their savings. At the end of the 17th century the cost of war with France was massive, so the group of Goldsmiths established a bank with name of “Bank of England” in 1694 in order to provide a loan to the Government.  Later, it became the central bank of England, and 1946 it was nationalized. The bank has played a vital role in the development of the modern banking.

Banking History of the USA

The first bank of the USA was founded in February, 1791 with the name of “Bank of United States” by the first Secretary of the Treasury, Alexander Hamilton. The purpose of the bank was to pay of war debts, raise money for the new Government, establish a national bank and create common currency. However, Hohhhhthe bank was wounded up in 1811.  

Banking History of India

The first bank of India is “Bank of Hindustan” which was founded in 1770 at Calcutta under European management system. This bank was liquidated in 1829-32. The bank of Calcutta was established in 1806.  In 1809, it was renamed as the Bank of Bengal. Reserve Bank of India was established in 1935 as central bank. Habib bank was established in 1941 at Bombay. And Muslim Commercial bank was established in 1947 at Calcutta. MCB was established with a view to provide banking facilities to the business community of the sub-continent.

Banking History of Pakistan

Before independence, Reserve bank of India was the central bank for both India and Pakistan. After partition the British Government’s distributed the reserves of “Reserve Bank of India” between Pakistan and India. Consequently, State Bank of Pakistan was organized in July 1948 in order to start the central banking functions in Pakistan.

Habib bank was shifted from Bombay to Karachi in 1947. In July 1974, all commercial banks were nationalized during the government of Zulfikar Ali Bhutto. In August 1991, their privatization started.


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