In the initial stages, that is during the advent of banking, activities were largely centered on money lending and it was restricted to a select number of families working as a propriety firm. The Bank of Venice founded in Italy in 1157 AD was the first public banking institution. During its origin, it had nothing to do with the business of banking. Thus banking began in its own way.

The then republic being engaged in war, and in short of funds, it had to meet the need for finances and finally signed up for a forced loan. The contributors to that loan were allowed an annual interest of four percent on sums they had been obliged to lend. Certain branches of public revenue were assigned the payment of that interest. Thus a corporation entitled the ‘Chamber of Loans’ was created. This corporation was created for the express purpose of
• Looking after the business
• Managing the various branches
• Collecting the revenue from the lenders
• Attending to and securing the punctual payment of interest, as it fell due.

Till then, there was no bank in the true sense of the word. But this chamber, in the course of its business activities had a chance to purchase and sell the bills of exchange. This happened when the means of corporation’s activities were undoubted and its character was highly respectable. It was soon discovered that its bill gave it an additional value. The chamber generally had access to limited funds.

It was found to be advantageous to invest or to employ those funds in the business of buying and selling or in the exchange of money. In the process of time, the chamber became a regular dealer in that branch of business. That is, it adopted the business of discounting or lending money upon mercantile paper. Now this is one great branch of business in a modern bank.