Banking began with the first prototype banks of merchants of the ancient world, which made grain loans to farmers and traders who carried goods between cities, and this system is known as a barter system. Gradually the goldsmiths began to lend the money out on behalf of the depositor, which led to the development of modern banking practices; promissory notes (which evolved into banknotes) were issued for money deposited as a loan to the goldsmith A Bank is a financial institution that accepts deposits from the public and creates credit.[1] Lending activities can be performed either directly or indirectly. The Indian government, when nationalizing all the larger Indian banks in 1969, argued that banking was “inspired by a larger social purpose” and must “sub-serve national priorities and objectives such as rapid growth in agriculture, small industry and exports.1”. A retrospect of the events clearly indicates that the Indian banking sector has come far away from the days of nationalization. The Narasimham Committee laid the foundation for the reformation of the Indian banking sector. Constituted in 1991, the committee submitted two reports in 1992 and 1998, which laid significant thrust on enhancing the efficiency and viability of the banking sector. As the international standards became prevalent, banks had to unlearn their traditional operational methods of directed credit, directed investments, and fixed interest rates, all of which led to deterioration in the quality of loan portfolios, the inadequacy of capital, and the erosion of profitability.
Keywords: prototype banks, promissory notes, and nationalization.
Received : 4th January 2019
Accepted : 25th January 2019
Published : 28th January 2019
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