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Banking

Modem financial practice is of a complicated nature having attained this highly developed efficiency after ages of evolution, but the profession of banking in some form or the other has existed even in the earliest times. The original form of banking in our country may have been purely money-lending but with the changing need of times people felt the need of depositing money for safe custody and interest with person’s or businessmen of integrity and character. The money so deposited would fetch some interest to the depositor while the persons entrusted with the money would lend it out to others at a higher rate of interest than he himself was paying. Simplest form of it is the practice of banking, lending out on interest moneys that have been deposited by other persons.

Modern Commerce and Banking

Banking is a very necessary wheel in the complicated machinery of modem commerce. It is noticed that countries which are most advanced in commerce and trade have a very efficient and highly developed system of banking. In Pakistan the modem system has not extended far enough and this does to spell well for the country’s trade. Credit plays a very important part in modern business. A perfectly honest businessman may have the capacity to invest money in such a way as to derive a great profit out of it and his business may call for greater investment that he can meet from his own purse. It is in such a case that he is to utilize other people’s money which for them may not have the same productive value. It is the banks that by supplying the requisite money not only help the individual concerned in his business but also realize the full productive worth of money and increase the trade and commerce of the country. Thus an important function of banks is to prevent hoarding of wealth with individuals by taking charge of their money for safe custody with an undertaking to return it either at a definite date or on demand. For fixed deposits banks usually pay a higher rate of interest than in other cases and they can safely invest such moneys in one business or the other for a definite period. In case of current deposit the banker undertakes to repay the money on demand by meeting cheese of order notes of the depositor aid as he has to produce money at a very short notice, he has to keep a considerable portion of it in hand or invested in such a manner than it can be collected almost at once.

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