Conclusion

In many countries, big banks, such as the Bank of Russia, the Bank of England, the Bank of Prussia, or the banks of New York, were relied upon by the national or federal government for important infrastructure projects or national crises such as wars. The transfer of reserves could be provided through laws, or, in the case of banks of New York, through interest on barren reserves that smaller banks can reap by sending their reserves to the bank vaults in New York. This centralised manner of banking, which is a common practice in almost every country in our times, strengthens the financial system of a country by giving its central government a ready source of credit. The establishment of the Federal Reserve Bank in the United States was the natural outcome of the end of the National Banking System in 1913. In principle, its main role was similar to that of the banks of New York under the National Banking System.

Centralised banking makes a financial system vulnerable to a general economic crisis if the books of the central bank are not sound. This major evolution in banking, closely associated with the rise of Nationalism in the modern age, and first practised in England, Prussia, Russia and the United States, is one of the least acknowledged and appreciated ideas of modern times. The unification of Italy, Germany and other countries almost coincided with the emergence of or the realisation of the need for proper central banking and central consolidation of capital in these countries.

The Unification of Germany in 1871 almost coincided with the unity of coinage in that country. The Reichsbank was established four years later. Going further back, it can be safely stated that the unification of Italy was not pulled out of a magical hat, but rather wisely planned by Victor Emmanuel II, King of Sardinia from 1849 to 1861. Victor Emmanuel planned the reorganisation of the Bank of Genoa and its merger with the Bank of Turin to institute, in 1850, the National Bank of the Kingdom of Italy, initially known as the National Bank of the Sardinian States. No less important is the fact that even Switzerland had to comprise its confederal character and institute a Central Bureau in 1875. From that year, the country’s banks began depositing their funds at this bureau, which was under the direction and supervision of the Bank of Zurich. In India, the RBI Act was passed in 1934, the year in which the Indian National Congress emerged as the largest party in the country’s general election. The Reserve Bank of India began operations on April 1, 1935, but the bank’s main office was moved to Mumbai two years later.

It is important to understand the modern concept of banking in light of events that have taken place in different countries across the globe. The modern concept of banking is essentially a natural growth of traditional banking practices. The introduction of paper money, certifying the possession of the same amount of coins or specie, transformed the character of money. These ideas played a great role in the development of humanity and that of human ideas.

These banking practices in many countries across the globe are very much in line with the evolution of ideas. An international bank, such as the World Bank, can play a great role in ensuring sustainable and equitable development.