The mother of all economic trading concept prevalent today is barter.

It is the very basic and primitive way of trading where commodities are considered to be medium of exchange. But the troubles in this economy were Double coincidence of wants for exchange Common measure of value of the exchange Indivisibility of certain goods Transportation problem

This led to the emergence of money in the market. At that point of time, the civilization comprised two group of people- the affluent class, having excess money, who used to lend their money at high interest rate to the poor class. Another concept that came into scenario was the indigenous banking system. The indigenous bankers used to lend money on the security of jewels as well as on promissory notes. They functioned both at urban and rural areas. Most of the loans were short term and were repayable with interest either in one or more installments. Some drawbacks of indigenous banking are: Higher interest rates Unproductive loans Exploitation of customers

These shortcomings were overcome by the co-operative movement. The purpose of co-operative movement was to establish cooperative societies with legal existence who would lend money to their members at a low interest rate. After the co-operative movement, there was the emergence of joint-stock banks. A joint stock bank usually issues stock and requires shareholders to be held liable for the banks debt. A commercial bank is a type of financial institution and intermediary. It is a bank that provides transactional, savings, and money market accounts and also accepts time deposits. The main functions of commercial banks are: Transfer of funds Acceptance of deposits Offering deposits as loans for establishment of industries, purchase of houses, capital investment purposes etc.

Banking in India originated in the later years of 18th century. The first bank in India was General Bank of india(in 1786). The oldest bank in India is State Bank of India. It was originated in 1806 in the name of Bank of Calcutta. Then came other two presidency banks- Bank of Bombay and Bank of Madras. These three banks merged in 1921 and formed Imperial Bank which was named State Bank of India after independence. The over all banking system in India are divided into two phase- pre-reform and post-reform period. Prior to reform, Indian financial system was highly regulated. Banks were perceived to function as a tool to implement the development strategy taken by the Government. For this purpose all the large private banks were nationalised in two stages- the first in 1969 and the second in 1980. There was control over interest rate, regulation to extend the business in rural areas and resource allocation accordingly. Beside these, Cash Reserve Ratio (CRR) and Statuitory Liquidity Ratio (SLR) was abnormally high. All these contributed to the nonprofitability and inefficiency of the banks and since Indian economy was closed then, there was no global competition which made the performance of the banks very poor. The first wave of liberalisation took place in late 1980s and a more comprehensive reform in 1991, following the report of Narasimham Committee. The major changes that this reform brought were: Reduction of CRR and LSR Interest rate and entry de-regulation Shifting from intrusive control to overall banking supervision. Global competition among banks on the basis of their performance

As a result number of banks increased drastically over the years. The last decade has experience many positive developments in banking system in terms ofg growth, profitability and non-performing assets. Though value creation, growth, better regulation and innovation in banking sector have contributed in higher GDP and employment but still banking penetration is limited only to a segment of customers and geographies in India.