Short Summary

This chapter explains the transition from the primitive barter system—highlighting its core drawback of the lack of double coincidence of wants—to the evolution and adoption of modern money. It defines money, outlines its essential characteristics and diverse functions as a medium of exchange, measure of value, and store of value, and classifies various types of money including legal tender, bank money, and high-powered money. The chapter further examines the conceptual framework and historical origin of banking, detailing the operational classification of financial institutions into central banks, commercial banks, regional rural banks, and non-banking financial institutions (NBFIs).