Explain the application of the concept “Bank”– Discuss the concept applicable in various countries.
Banking in the modern sense of the word can be traced to medieval and early Renaissance Italy, to the rich cities in the north like Florence, Venice and Genoa. The Bardi and Peruzzi families dominated banking in 14th century Florence, establishing branches in many other parts of Europe. Perhaps the most famous Italian bank was the Medici bank, set up by Giovanni Medici in 1397. The earliest known state deposit bank, Banco di San Giorgio (Bank of St. George), was founded in 1407 at Genoa, Italy.
Origin of the word
The word bank was borrowed in Middle English from Middle French banque, from Old Italian banca, from Old High German banc, bank “bench, counter”. Benches were used as desks or exchange counters during the Renaissance by Florentine bankers, who used to make their transactions atop desks covered by green tablecloths.
One of the oldest items found showing money-changing activity is a silver Greek drachm coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350–325 BC, presented in the British Museum in London. The coin shows a banker’s table (trapeza) laden with coins, a pun on the name of the city. In fact, even today in Modern Greek the word Trapeza means both a table and a bank.
What is Bank?
A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers that have capital deficits to customers with capital surpluses.
A bank is a business like a video store, a restaurant, or a skating rink. The business needs to make enough money to pay the people who work there and of like electricity, paper, and even clips
In order for a bank to stay open, t needs to get many people to put their money in it. Each bank tries to make their bank look better than all of other by services that some other banks might not have. Another way to get more people to put their money n the bank s to pay them interest is extra money the bank gives you to keep there. This means that you earn money on every taka you put into the bank.
Business of Banking Companies
In addition to the business of banking, a banking company may engage in all or any of the following forms of business, namely:-
a) The borrowing, raising or taking up of money;
b) The lending or advancing of money either upon or without security;
c) The drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hoondees, promissory notes, coupons, drafts,bills of lading, railway receipts, warrants, debentures, certificates, participation term certificates, term finance certificates, musharika certificates, modareka certificates, such other instruments as may be approved by the Bangladesh Bank, and such other instruments and securities whether transferable or negotiable or not;
d) The granting and issuing of letters of credit, traveller’s checks, and circular notes;
e) The buying, selling and dealing in gold and silver coins and coins of other metals;
f) The buying and selling of foreign exchange including foreign bank notes;
g) The acquiring, holding, issuing on commission, underwriting and dealing in stocks, funds, shares, debenture stock, obligations, participation term certificates, term finance certificates, musharika certificates, modareka certificates and such other instruments and investments of any kind as may be approved by the Bangladesh Bank;
h) The purchasing and selling of bonds, scrips or other forms of securities, participation term certificates, term finance certificates, musharika certificates, modareka certificates and, on behalf of the constituents of the Bangladesh Bank or others, such other instruments as may be approved by the Bangladesh Bank;
i) the negotiating of loans and advances;
j) the receiving of all kinds of bonds or other valuables on deposit or for safe custody or otherwise;
k) Providing vaults for the safety of the deposits;
l) The collecting and transmitting of money against securities;
m) Acting as agents for the Government, local authorities or any other person;
n) The carrying on of agency business of any description including the clearing and forwarding of goods and acting as a law agent on behalf of customers, but excluding the business of a managing agent or treasurer of a company;
o) Contracting for public and private loans and negotiating and issuing the same;
p) The effecting, insuring and underwriting of shares, stocks, debentures, debenture stock of any company, corporation or association and the lending of money for the purpose of any such issue;
q) The carrying on and transacting of every kind of guarantee and indemnity business;
r) The buying and acquiring of any kind of property including merchandise, patents, designs, trademarks and copyrights, in addition to, at the normal business period of a bank, such or similar transactions as-
1) repurchase by the seller, or
2) selling in the way called purchase on rent, or
3) repayment of outstanding rates, or
4) leases, or
5) sharing out of revenues, or
6) financing in any other way;
s) Bringing into possession any property which may satisfy or partly satisfy any of the claims of the banking company and the managing and borrowing of such property;
t) Acquiring, holding and managing of any property or any right, title or interest in any such property which may form the security or part of the security for any loans or advances or which may be connected with any such security;
u) Undertaking and executing trusts;
v) Undertaking the administration of movable and immovable property as executor, trustee or otherwise;
w) For the benefit of employees or ex-employees of the banking company or the dependants and connections of such persons-
Use of words indicating bank or trust company–
(1) The name of every bank shall contain the word “bank” and the name of every trust company shall contain the word “trust,” or the word “bank.” Except as provided in RCW 33.08.030 or as otherwise authorized by this section or approved by the director, only a national bank, federal savings bank, a bank or trust company authorized by this title, savings bank under Title 32 RCW, bank holding company or financial holding company, a holding company authorized by this title or Title 32 RCW, or a foreign or alien corporation or other legal person authorized by this title to do so, shall:
(a) Use as a part of his [or her] or its name or other business designation, as a prominent syllable within a word comprising all or a portion of its name or other business designation, or in any manner as if connected with his [or her] or its business or place of business any of the following words or the plural thereof, to wit: “bank,” “banking,” “banker,” “bancorporation,” “bancorp,” or “trust,” or any foreign language designations thereof, including, by way of example, “banco” or “banque.”
(b) Use any sign, logo, or marketing message, in any media, or use any letterhead, billhead, note, receipt, certificate, blank, form, or any written, printed, electronic or internet-based instrument or material representation whatsoever, directly or indirectly indicating that the business of such person is that of a bank or trust company.
(2) A foreign corporation or other foreign domiciled legal person, whose name contains the words “bank,” “banker,” “banking,” “ban corporation,” “Bancorp,” or “trust,” or the foreign language equivalent thereof, or whose articles of incorporation empower it to engage in banking or to engage in a trust business, may not engage in banking or in a trust business in this state unless the corporation or other legal person (a) is expressly authorized to do so under this title, under federal law, or by the director, and (b) complies with all applicable requirements of Washington state law regarding foreign corporations and other foreign legal persons. If an activity would not constitute “transacting business” within the meaning of RCW 23B.15.010 or chapter 23B.18 RCW, then the activity shall not constitute banking or engaging in a trust business. Nothing in this subsection shall prevent operations by an alien bank in compliance with chapter 30.42 RCW.
(3) This section shall not prevent a lender approved by the United States secretary of
housing and urban development for participation in any mortgage insurance program under the National Housing Act from using the words “mortgage banker” or “mortgage banking” in the conduct of its business, but only if both words are used together in either of the forms which appear in quotations in this sentence.
(4) Any individual or legal person, or director, officer or manager of such legal person, who knowingly violates any provision of this section, shall be guilty of a gross misdemeanor.
Use of the word “Bank” in Bangladesh
Every company carrying on the business of banking in Bangladesh shall use the word “Bank” or any of its derivatives as part of its name and on company other than a banking company shall use in its name any word calculate to indicate that is the banking company.
Provided that nothing this section shall apply to-
a) Any subsidiary company of a banking company formed one or more purpose mention n subsection (1) of section 26;
b) Any association of banks formed for protection of their must interest and registered under section 26 of the company Act.
Provided further that the government may, by notification in the official Gazette, and subject to the condition determine therein, grant the right to use the word ”Bank” or any of its derivatives as part of it name to any company completely or controlled by Bangladesh Bank, including non banking companies.
It clearly define that only banking company can use “Bank” word, other company don’t have any right to use this word.
Use of the word “Bank” other countries and comparison
Banking Companies Act, 1991
An Act made to make provisions for banking companies
Whereas it is expedient to make provisions for banking companies therefore the following Act is hereby passed:
1. Short title. – (1) This Act may be called the Banking Companies Act, 1991.
(2) It shall be deemed to have come into force on 14th February 1991.
2. Application of other Acts.- The provisions of this Act shall be in addition to, and not, save as hereinafter expressly provided, in derogation of, the Companies Act, 1913 (VII of 1913) , and any other Act for the time being in force.
3. Limited application of this Act to co-operative banks and other financial institutions. Nothing in this Act shall apply to a co-operative bank or any other financial institution registered under the Co-operative Societies Ordinance, 1985 (Iof 1985) or any other Act for the time being in force relating to co-operative banks:
Provided that the Bangladesh Bank may carry out inspections of and issue directions to co-operative banks as prescribed for banking companies under section 44 and 45 of this Act.
4. Power to suspend operation of this Act. – (1) The Government if, on a representation made by the Bangladesh Bank in this behalf it is satisfied that it is expedient so to do, may by notification in the official Gazette suspend for at most 60 days the operation of all or any of the provisions of this Act in relation to any specified banking company.
(2) The Government may, by notification in the official Gazette, extend from time to time, the period of any suspension under sub-section (1) for such period or periods, not exceeding 60 days at one time, as it thinks fit, so however that the total period does not exceed one year.
(3) Notifications issued under this section shall be submitted to the national parliament as follows:
a) If it is in session, within 10 days of the issue of the notification, and
b) If it is not in session, within 10 days of the beginning of the session following the issue of the notification.
5. Definitions. – In this Act, unless there is anything repugnant in the subject or context,-
a) “approved securities” means securities in which a trustee may invest money under clause (a), clause (b), clause (bb), clause (c) or clause (d) of Section 20 of the Trust Act, 1881 (II of 1882) and for the purpose of section 13 (3) includes such securities as the Government may, by notification in the official Gazette, declare to be approved securities for the purpose of this section.
b) “Company” means any company which may be wound up under the Companies Act;
c) “Companies Act” means Companies Act; 1913 (VII of 1913);
d) “Demand liabilities” means liabilities which must be met on demand;
e) “Secured loan or advance” means a loan or advance made on the security of assets the market value of which is not at any time less than the amount of such loan or advance, and “unsecured loan or advance” means a loan or advance not so secured, or that part of it which is not so secured;
f) “Scheduled bank” has the same meaning as in the Bangladesh Bank Order ( P.O. NO. 127 of 1972) Article 2 (j);
g) “Debtor” means-
1) any person, company or organization accepting deposits of money on the basis of shared win and loss, or
2) any person, company or organization taking advantage of financial opportunities on the basis of shared win and loss, purchase or lease on rent, or in any other way;
h) “New bank” means any bank denominated in the Bangladesh Banks (Nationalization) Order, 1972 (P.O. No. 26 of 1972);
i) “Creditor” means-
1) any person, company or organisation accepting deposits of money on the basis of shared win and loss, or
2) any company or financial organization granting financial opportunities on the basis of shared win and loss, purchase or lease on rent, or in any other way;
j) “Private company” has the same meaning as in the Companies Act;
k) “Bangladesh Bank” means Bangladesh Bank established under the Bangladesh Bank Order, 1972 (P.O. No. 127 of 1972);
l) “rule” means a rule made under this Act;
m) “special bank” means any bank established or formed by or under any Act in force for the time being and includes such banks as the Government may, by notification in the official Gazette, declare special banks for the purpose of this Act;
n) “managing director” means-
1) In relation to a new bank, a managing director as defined in the Bangladesh Bank (Nationalization) Order,1972 (P.O. No. of 1972);
2) In relation to a special bank, a managing director as defined in the Act or the documents having the force of an Act, under which the said bank has been established or formed;
3) In relation to any other banking company, a director who, by virtue of an agreement with the banking company or of a resolution passed by the banking company in general meeting or by its Board of Directors or by virtue of its memorandum or articles of association, is entrusted with the management of the banking company, and includes a director occupying the position of a managing director, by whatever name called;
o) “Banking company” means any company transacting the business of banking in Bangladesh, and includes all new banks and special banks;
Explanation.- Any company which is mainly engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause.
p) “Banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdraw able by cheque, draft, order or otherwise;
qu) “temporary liability” means any liability other than demand liability;
r) “gold” means gold in the form of coin, whether legal tender or not, or in the form of bullion or ingot, whether refined or not;
s) “register” shall have the same meaning as in the Companies Act.
6. Act to override articles, memorandum, etc. . – Save as otherwise expressly provided in this Act,-
a) except new banks and special banks, the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a banking company, or in any agreement executed by it, or in any resolution passed by the banking company in general meeting or by its Board of Directors, wether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act, and
b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, be void.
Under English common law, a banker is defined as a person who carries on the business of banking, which is specified as:
Conducting current accounts for his customers
paying cheques drawn on him, and
Collecting cheques for his customers.
BANKING REGULATIONS ACT 1949 : The Banking Regulation Act was passed as the Banking Companies Act 1949 and came into force wef 16.3.49. Subsequently it was changed to Banking Regulations Act 1949 wef 01.03.66. Summary of some important sections is provided hereunder. The section no. is given at the end of each item. For details, kindly refer the bare Act.
Banking means accepting for the purpose of lending or investment of deposits of money from public repayable on demand or otherwise and withdrawable by cheque, drafts order or otherwise (5 (i) (b)).
Banking company means any company which transacts the business of banking (5(i)(c)
Transact banking business in India (5 (i) (e).
Demand liabilities are the liabilities which must be met on demand and time liabilities means liabilities which are not demand liabilities (5(i)(f)
Secured loan or advances means a loan or advance made on the security of asset the market value of which is not at any time less than the amount of such loan or advances and unsecured loan or advances means a loan or advance not secured (5(i)(h).
Defines business a banking company may be engaged in like borrowing, lockers, letter of credit, traveller cheques, mortgages etc (6(1).
States that no company shall engage in any form of business other than those referred in Section 6(1) (6(2).
For banking companies carrying on banking business in India to use at least one word bank, banking, banking company in its name (7).
Restrictions on business of certain kinds such as trading of goods etc. (8)
Prohibits banks from holding any immovable property howsoever acquired except as acquired for its own use for a period exceeding 7 years from acquisition of the property.
RBI may extend this period by five years (9)
Prohibitions on employments like Chairman, Directors etc (10)
Paid up capital, reserves and rules relating to these (11 & 12)
Banks not to pay any commission, brokerage, discount etc. more than 2.5% of paid up value of one share (13)
Prohibits a banking company from creating a charge upon any unpaid capital of the company. (14) Section 14(A) prohibits a banking company from creating a floating charge on the undertaking or any property of the company without the RBI permission.
Prohibits payment of dividend by any bank until all of its capitalised expenses have been completely written off (15)
To create reserve fund and 20% of the profits should be transferred to this fund before any dividend is declared (17 (1))
Cash reserve – Non-scheduled banks to maintain 3% of the demand and time liabilities by way of cash reserves with itself or by way of balance in a current account with RBI (18)
Permits banks to form subsidiary company for certain purposes (19)
No banking company shall hold shares in any company, whether as pledgee, mortgagee or absolute owners of any amount exceeding 30% of its own paid up share capital + reserves or 30% of the paid up share capital of that company whichever is less. (19(2).
Restrictions on banks to grant loan to person interested in management of the bank (20)
Power to Reserve Bank to issue directive to banks to determine policy for advances (21)
Every bank to maintain a percentage of its demand and time liabilities by way of cash, gold, unencumbered securities 25%-40% as on last Friday of 2nd preceding fortnight (24).
Return of unclaimed deposits (10 years and above) (26)
Every bank has to publish its balance sheet as on March 31st (29).
Balance sheet is to be got audited from qualified auditors (30 (i))
Publish balance sheet and auditors report within 3 months from the end of period to which they refer. RBI may extend the period by further three month (31)
Prevents banks from producing any confidential information to any authority under Indl Disputes Act. (34A)
RBI authorised to undertake inspection of banks (35).
Amendment carried in the Act during 1983 empowers Central Govt to frame rules specifying the period for which a bank shall preserve its books (45-y), nomination facilities (45ZA to ZF) and return a paid instrument to a customer by keeping a true copy (45Z).
Certain returns are also required to be sent to RBI by banks such as monthly return of liquid assets and liabilities (24-3), quarterly return of assets and liabilities in India (25), return of unclaimed deposits i.e. 10 years and above (26) and monthly return of assets and liabilities (27-1).
In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments, including cheques, and this Act contains a statutory definition of the term banker: banker includes a body of persons, whether incorporated or not, who carry on the business of banking’ (Section 2, Interpretation). Although this definition seems circular, it is actually functional, because it ensures that the legal basis for bank transactions such as cheques does not depend on how the bank is organized or regulated.
The business of banking is in many English common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business. When looking at these definitions it is important to keep in mind that they are defining the business of banking for the purposes of the legislation, and not necessarily in general. In particular, most of the definitions are from legislation that has the purposes of entry regulating and supervising banks rather than regulating the actual business of banking. However, in many cases the statutory definition closely mirrors the common law one. Examples of statutory definitions:
“banking business” means the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to customers, and includes such other business as the Authority may prescribe for the purposes of this Act; (Banking Act (Singapore), Section 2, Interpretation).
“banking business” means the business of either or both of the following:
receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than [3 months] … or with a period of call or notice of less than that period;
paying or collecting checks drawn by or paid in by customers
Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and internet banking, the cheque has lost its primacy in most banking systems as a payment instrument. This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect checks.
So we can say that every banking corporation organized under the laws of this state shall include the word “bank” or “banking” in its name. No corporation hereafter organized shall include in its name the words “bank,” “banker,” “bankers,” “banking” or “trust company,” or any of them, or any combination thereof, or any words of similar import, unless such corporation shall, by the express provisions of its charter, be limited solely to the doing of a banking or trust business, or a combination of banking and trust business as contemplated in this chapter; and all such corporations shall be incorporated and organized under and pursuant to the terms of this chapter providing for the incorporation of banking corporations and not otherwise.
Every corporation organized under the laws of this state for the purpose of conducting or carrying on a commercial banking business, or the business of a savings bank, or trust company, or the exercise of trust powers as defined in this title, or any combination thereof, shall be subject to supervision by the department of bank supervision and the state comptroller, and to assessments for the maintenance of said department as provided by law.
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