Modern Day Banking seems to have engulfed all the business alike. No one can manage or work without one. It is absolutely the need of the day. Banking has always been an integral part of our society since medieval times. Earlier, it used to be purely individual; primarily, a job thought to be entrusted to the Jews or the Indian “Bania”, a term allocated to someone truly very strict in calculations, especially in lending money and collecting interest thereon. As far as known history is concerned, our yesteryear banking used to be very exploitative because centralized rules were non-existent in such times. It resulted in the interest rates of the choice of money lenders. Also refer: Banking Terms
Centralization of Banking & Regulation of Interest Rates
Since we live in a civilized society today, reigns of money lenders have been tightened in olden terms and in up-to-date terminology, Federal governments regulate the interest rates, primarily via central banks like State Bank of Pakistan, Federal Reserve of America, Reserve Bank of India etc. They regulate banking practices and overall governance including policy interest rates etc. However, banks, both publicly owned as well as privately owned, are free to manage their affairs within the framework & regulations set by centrals banks. For instance, Pakistan has BCO (Banking Companies Ordinance 1962) as well as Prudential Regulations for Corporate, Commercial, SME banks etc. They have their own products, their own premises, working capital and their own ideas to utilize the funds.
Difference between Olden Days Money Lenders & Banks
In contrast to the olden days’ money lenders, banks work within a broader horizon of a complex network of services as well as facilities including but not limited to money lending in Modern Day Banking. Even money lending has taken several layers and features which have come into effect over periods of time. Let us explore what banks do today! These are the major tasks banks perform in today’s world.