Private And Public Banks
Banks have been broadly divided into private and public.A 
private bank is that in which there are but few partners, 
and these attend personally to its management. A public 
bank is that in which there are numerous partners or 
shareholders, and they elect from their own body a certain 
number, who are intrusted with its management.
The business of banking consists chiefly in receiving 
deposits of money, upon which interest may or may not be 
allowed; in making advances of money, principally in the 
way of discounting bills; and in affecting the transmission 
of money from one place to another. Banks in metropolitan 
cities are usually the agents of the banks in smaller 
communities and charge a commission on their transactions.
The disposable means of a bank consist of - First, the 
capital paid in by the partners, or shareholders. Second, 
the amount of money deposited by their customers. Third, 
the amount of notes they are able to keep out in 
circulation. Fourth, the amount of money in the course of 
transmission - that is, money they have received, and are 
to repay, in some distant place, at a future time.
These disposable means are employed - First, in discounting 
bills. Second, in advances of money in the form of cash 
credits, loans, or overdrawn accounts. Third, in the 
purchase of government or other securities. Fourth, a part 
is kept in the banker's till, to meet the current demands. 
Of these four ways of employing the capital of a bank, 
three are productive, and one is unproductive. The 
discounting of bills yields interest; the loans, and the 
cash credits, and the overdrawn accounts, yield interest; 
the government securities yield interest; the money in the 
till yields no interest. 
The expenses of a bank may be classified thus: Rent, taxes, 
and repairs of the building or premises in which the 
business is carried on; salaries of the officers; 
stationers' bills for books, paper, notes, stamps, etc.; 
incidental expenses, as postage, light, heat, etc.
The profits of a bank are that portion of its total 
receipts - including discount, interest, dividends, and 
commission - which exceeds the amount of the expenses.
Banks as Commercial Institutions. In commercial language a 
bank is a repository, or an establishment, for the purpose 
of receiving the money of individuals;either to keep it in 
security, or to improve it by trafficking in goods, 
bullion, or bills of exchange;and, as stated above, it may 
be either of a public or of a private nature. A public bank 
is generally regulated by certain laws, enacted by the 
government of the nation or state, which constitute its 
charter, limit its capital, and establish the rules by 
which it is to conduct business. A private bank, on the 
other hand, is merely a contract among individuals, for 
carrying on a trade in money and bills; and the 
responsibility of the partners is usually the only security 
of those who transact business with it.
Banks then are properly commercial institutions which by 
affording credits, or issuing notes, as the representative 
of money, enable merchants, with greater facility, to buy 
and sell commodities, at home or abroad. The produce of one 
country is thus exchanged with that of another, by means of 
a medium to which an ideal value is attached; hence the 
great utility of banking establishments in all commercial 
countries.
Classification of Banks. Private banking is the oldest form 
of the banking business  and, as is well known, the 
antiquity of banks is very great. Records exist of banking 
transactions among the Assyrians and in the Metropolitan 
Museum in New York there are Babylonian tablets bearing 
distinct records of transactions in banking that took place 
in the reign of Nebuchadnezzar.