(A) Evolution of banks:

• The word ‘bank’ means ‘mass’ or ‘heap’. ‘Bank’ word has been originated from the French word ‘Banque and Italian word ‘banca’ both meaning ‘Bench’ for money exchange.
• In Sanskrit, the word similar to bank is ‘bhanda’ which means collection of fund/capital.
• Traditionally, the money lenders in Europe displayed coins (currencies) of different countries in big heaps on benches or tables for lending or exchanging.
• Thus, the word bank means collection/fund/stock of money.
• The first bank to be set up in the world was ‘Bank of Barcelona’ in Spain in 1401.
• It was then, that the currency money was introduced in the world.

(B) Functions of money:

The currency money immediately came into action with following functions:
(a) Medium of exchange: Money immediately became a unit of exchange for all goods and services.
(b) Measure of value: Money became a common unit of account or measure of value i.e. all the goods and services started to be valued in terms of money.
(c) Standard of deferred payments: People also started using money for deferred payments i.e. payments to be made in future.
(d) Store of value: Money started getting stored and exchanged with other currencies to enhance its own worth or to increase ones’ wealth.

Going forward, the world realized the need to maintain the value of money at world level. This gave rise to banks as institutions for safety of money, transfer of money, and maintaining the value of money