ORIGIN AND DEFINITION

Origin of banking

It is believed that the word ‘bank’ is said to be derived from the word ‘banco’ or ‘bancus’ or ‘banque’ or ‘banc’. The meaning of these French words is BENCH. This is because in the earlier times the banking business was conducted on benches and by this the bench became the symbol of banking business and gradually gained the word bank. An interesting fact is that when a business failed during that period, the benches were broken and so the word ‘BANKRUPT’ came into fashion.

There are many such theories about the origin of banking and the above mentioned is just one of those theories.

Definition

According to the BANKING REGULATIONS ACT sec.5 (B) ‘banking’ has been defined as

 “Accepting for the purpose of lending and investment, of deposits of money from public, repayable on demand, order or otherwise and withdraw able by cheque, draft order or otherwise.”

The definition points out the key function of a banker i.e. receiving deposits, lending or investing these deposits and repayment of the deposits on demand via the means possible. But the definition does not tell us about the subsidiary functions carried out by a banker.

Moreover, it should be remembered that a moneylender is not a banker because he doesn’t accepts deposits. He relies on his own sources and so he cannot be considered as a banker. If a firm accepts deposits then it can’t be termed as a bank because it should be remembered that it is not performing the function of lending money and so it is also not considered a bank.

Now let us look into the matter of customer of a bank. There are certain prerequisites that a customer should constitute, they are as follows:

  • He must have some sort of an account.
  • Even a single transaction may constitute him as a customer.
  • The dealing must be of a banking nature.
  • Frequency of transactions is anticipated but not insisted upon.
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