History of Banking

Almost from the beginning of banking some sort of note was given to certify that the bank was holding money for the depositor. Originally this was a depository receipt often from a goldsmith who held the gold for safekeeping and it could be redeemed by anyone presenting the note. Thus it became easier to exchange the notes than the gold itself. Goldsmiths learned that not everyone would present notes for the gold at the same time and so they (illegally) began using the gold they were holding for their own smithing business. Thus began Fractional Reserve Banking.

The next step in banking evolution was a passbook which recorded deposits and withdrawals in a small book rather than issuing a separate note for each transaction. Later this evolved into a monthly statement and eventually to an online electronic statement.

A bank is a financial institution that accepts deposits from the public and creates Demand Deposit. Lending activities can be performed either directly or indirectly through capital markets. Due to their importance in the financial stability of a country, banks are highly regulated in most countries

A deposit account is a savings account, current account or any other type of bank account that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the bank and represents the amount owed by the bank to the customer. Some banks may charge a fee for this service, while others may pay the customer interest on the funds deposited.

• Transactional accounts, known as "current accounts" in the Commonwealth and "checking accounts" in the United States. A deposit account for the purpose of securely and quickly providing frequent access to funds on demand, through various different channels. Because money is available on demand, these accounts are also referred to as "demand accounts" or "demand deposit accounts", except in the case of NOW accounts, which are rare checking accounts that require a seven-day notice before withdrawals.
• Money market account

A deposit account that pays interest at money market rates, and for which no notice or very short notice is required for withdrawals. In the United States, they are similar to checking accounts in that they offer check-writing privileges and instant access but they are subject to the same regulations as savings accounts, including monthly transaction limits.

• Savings account

Accounts maintained by retail banks that pay interest but can not be used directly as money (for example, by writing a cheque or using a debit card at a point of sale), although cash can be withdrawn from these accounts at an automated teller machine. While they are not as convenient to use as checking accounts, these accounts generally offer consumers a higher rate of interest than a transactional account and will usually be linked to a transactional account.

• Time deposit, also known as a certificate of deposit in the United States

A money deposit at a banking institution that cannot be withdrawn for a preset fixed 'term' or period of time and will incur penalties for withdrawals before a certain date. When the term is over it can be withdrawn or it can be rolled over for another term. Generally speaking, the longer the term the higher the interest rate offered by the bank.

• Call deposit

A deposit account that allows for the withdrawal of funds without penalty but requires a higher minimum balance to earn interest.

• Sweep account

A deposit account in which amounts over a certain balance are automatically transferred to another account pursuant to a pre-determined set of arrangements.