It is sometimes said that the modern bank, with its many hundreds of branches opening under the guidance of a remote head office, has lost the art of personal service and friendly dealings that characterized the old private banks, with their single office and intimate knowledge of the people and affairs of their locality. This is, indeed, a false impression: the modern bank has that same personal element, combined with financial strength and the widespread and efficient service that comes with a large organization. The leading subject of the daily education of a banker will be to learn whom to trust. In his dealings with the clients, the banker requires a keen insight into human nature, and in no other business is the personal touch so essential.

The stock-in-trade of a bank with respect to money and credit instruments; is mainly the manifold services it can render to clients in the conduct of their financial affairs.

What is a bank?

It is almost as if our past and present have realized that banking is so much a personal affair, and the services rendered are so varied, that no exact definition is possible. However, lawyers and text-book writers have arrived at the practical definition that a banker is “one who, in the ordinary course of his business, receives money which he repays by honouring the cheques of the persons from whom or for whose account he receives the money”. Thus it follows that, while many other services are undertaken, the majority of persons employed
in banking are chiefly occupied with operations and duties in connection with the collection and payment of cheques.

Development from early times The word “bank” is probably derived from the Italian banco which means a “bench”. It was on benches that Jewish merchants conducted their financial business in Lombardy many years ago. The word “bankrupt” may be traced back to the practice of breaking the bench of any merchant unable to meet his obligations.

Many of these merchants (or Lombards) went to England around the fourteenth century and settled in that part of the city of London now world–famous as Lombard Street.

Their financial resources led kings to depend on them for loans. Besides lending money, they dealt in money-changing and what we now describe as “financing” of foreign trade.

There was no cheque, and the bill of exchange fulfilled its function as a convenient meansof settling international debts.

The Lombards had their agents, friends and relatives abroad, to whom documents were addressed instructing them to pay out money to the presenter.

Consequently, the would-be traveller was thereby saved the trouble and risk of carrying money himself. Instead he paid the Lombard merchant in England and received the bills of exchange. Much the same things happens today by the use of letters of credit, travellers’ cheques, and bills drawn under documentary credits. In early
years of seventeenth century, there was the office of the Royal Exchanger (Exchequer) in England, who, for the benefit of the Crown, exchanged foreign moneys for a profit. This was subsequently taken over by the goldsmiths. For the purpose of their own business, these goldsmiths required stout safes, and it became the practice for merchants and other wealthy persons to entrust their cash and valuables to them for safekeeping.
Here again is another link with modern banking. The middle of the seventeenth century saw the true beginning
of the present system. The goldsmiths issued to their depositors receipts or notes in respect of the cash and/or articles left with them. These were payable on demand and, while the general public was not concerned, there was a considerable circulation of such notes among the wealthier class of merchants. These were the earliest form of bank-notes issued in England.

Soon after, there was the realization that the depositors would not all require payment at one and the same time.

Accordingly, they used a part of the cash to give loans to other persons, and the deposit of further cash was
encouraged, so that more loans could be given. In the same way, today’s banks use the deposits to earn money. To allow their customers to make out orders to pay money to bearers, the goldsmiths issued “cheque” books; a step of great importance in the evolution of banking.

Nevertheless, the development in the banking industry in the past two decade, have been unbelievably high and today with the help of e-banking, we shall witness more developments in years to come.

Central Bank of Iran The Central Bank of Iran, was established in 1961. The main function of CBI was originally set to secure the value of the Iranian currency and ensure credit adjustment. Twelve years later (ie 1973) a major change was made, and the scope of authorities of CBI were increased from 8 legal duties to 32.

Central Bank of Iran was the authorized body for policymaking in monetary, banking and credit affairs, trading of gold and silver, bank interest rates, and foreign currency securities. Soon after the Islamic Revolution took place, CBI, like many other state sector entities had to adjust its aims to the needs of the Islamic Revolution.
Later the equity shares of private banks became stateowned and gradually the banking system in Iran became
totally changed. Today, Iranian banks offer only “saving box” services rather than appropriate banking services.