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COMMERCIAL BANKING

The law which reformed the savings banks in 19833 finally allowed them to carry out all banking busi- ness for private individuals, but the corporate client business continued to be closed to them. Furthermore, the law annulled the legal form, in force since 1835 for the savings banks, of charitable bodies (in private law); they now acquired the legal form, hitherto unknown in France, of non profit- making financial institutions. With this step, the legislators made allowance for the fact that the savings banks had no profit-seeking shareholders who had to be paid interest from their annual sur- plus; rather, their operating result merely had to ensure the continued existence of the savings banks. Numerous. | 1 Commercial Banking INTRODUCTION Banking occupies one of the most important positions in the modern economic world. It is necessary for trade and industry. Hence it is one of the great agencies of commerce. Although banking in one form or another has been in existence from very early times modern banking is of recent origin. It is one of the results of the Industrial Revolution and the child of economic necessity. Its presence is very helpful to the economic activity and industrial progress of a country. Meaning A commercial bank is a profit-seeking business firm dealing in money and credit. It is a financial institution dealing in money in the sense that it accepts deposits of money from the public to keep them in its custody for safety. So also it deals in credit i.e. it creates credit by making advances out of the funds received as deposits to needy people. It thus functions as a mobiliser of saving in the economy. A bank is therefore like a reservoir into which flow the savings the idle surplus money of households and from which loans are given on interest to businessmen and others who need them for investment or productive uses. Definition of a Bank The term Bank has been defined in different ways by different economists. A few definitions are According to Walter Leaf A bank is a person or corporation which holds itself out to receive from the public deposits payable on demand by cheque. Horace White has defined a bank as a manufacture of credit and a machine for facilitating exchange. According to Prof. Kinley A bank is an establishment which makes to individuals such advances of money as may be required and safely made and to which individuals entrust money when not required by them for use. 2 Banking The Banking Companies Act of India defines Bank as A Bank is a financial institution which accepts money from the public for the purpose of lending or investment repayable on demand or otherwise withdrawable by cheques drafts or order or otherwise. Thus we can