Banking in old times was not the tightly monitored and tightly regulated business that it is today. Instead, earlier banking was completely a free market operation. Any entrepreneur could enter and exit the banking business without any restriction or licenses. In this article, we will trace the evolution of banking i.e. how banking changed to be the highly regulated business that it is today Goldsmiths to Moneylenders The banking profession, in the strictest sense of the word, was first carried on by goldsmiths in medieval Europe. Since, it was the business of the goldsmith to deal with valuable commodities the goldsmith would build strong vaults to protect their inventory from theft. The residents of the town wanted to rent the goldsmiths secure vault in order to keep their money safe. The goldsmith therefore started taking deposits and this was in a way the birth of modern banking. Over a period of time, the goldsmiths realized that the deposits are usually far in excess of the