What Is A Banking System?

by Arpita Wadhawan
Banking Crisis

The earliest evidence that we have to a banking system or what stood for a banking system comes from ancient India and Assyria, who often provided their farmers with grain loans, for a specific period and interest was levied on the same as well. There is enough archeological evidence to back this up and to an extent; you can even say that the genesis began with the barter system where goods were often traded for each other. Today, modern banking has certainly evolved into a banking system that bears little resemblance with the ones from 2000 BC, but both these practices dealt with banking and finance, with the modern one, representing the best of baking practices that had evolved since four thousand years ago.

Why a banking system is needed:

It is important to note that as society developed and as the first city-states formed, it became evident that there needed to be a strong institution for regulating all forms of loans, and enable others to deposit their valuables for safekeeping. These used to be some of the most ancient banking systems in place. A banking system that started with the earliest form of financial transactions has certainly evolved over the thousands of years to the modern variant, with its instantaneous transfer, debit cards, credit cards, overdrafts, and the list goes on. The fact is that a banking system is needed to ensure that the public can retain their confidence in institutions and the local governance while storing their funds and valuable assets with these organizations. These banking institutions, in turn, provide the government of the day with adequate finances and resources and even participate in various infrastructure projects as well. In short, banks help to build a nation and that is the reason why they are necessary.

The future of banking

When it comes to a banking system and it’s future – it is expected that most of the current banking transactions would become increasingly digitalized. This should enable consumers to conduct various baking transactions in real time and instantaneously. As far as banks are concerned, this should enable them to increase their productivity and help increase their profit margin as well.

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