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Appendix F notes that Banazir 'Half-wise' was originally a nickname, but being a word that had fallen out of colloquial use (along with Ranugad 'Stay-at-home') it remained as a traditional name in certain families.
So maybe the meaning wasn't so thought about among Hobbits, especially when shortened to Ban perhaps; but in any case some people today name their kids with no idea what the name means, or originally meant.
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