Definition, Importance, types, Characteristics, Advantage and Disadvantages of bank?

Background

The history of Commercial Bank in Nepal Starts from the Establishment of the Nepal Bank ltd. on Kartik 30, 1994 B.S. It is the first Commercial Bank of Nepal and prior to this, there was no such organised banking system in the country. The Bank was started with the paid up capital of 845000 rupees. The balance sheet figure of the first year of Nepal Bank ltd. was Rs.2815000. It started it's business by accepting deposits from the public by collecting Rs.1702000 in the initial year which was considered as an indication of Success. Later, the Nepal Rastra Bank was established on 2013 B.S. which has helped to make banking system more systematic and dynamic during that time.

As the time passed, the Rastriya Banijya bank was established on Magh 10, 2022 B.S. in order to play major role not only in domestic banking services but also in foreign trade. After the establishment of this bank, there was progress in the banking industry in Nepal.

A bank is a financial institution which deals with the monetary activities by accepting deposits, lending to the various parties against securities and performing agency service to its clients/ customer.

The institution of formal banking sector in Nepal commenced with the established in 1937 B.S. As Nepal Bank limited.(NBL). This was the first Commercial bank and after that in 1956 by the act of 1955 Nepal Rastra Bank established. A decade after the establishment of NRB, Rastriya Banijya Bank (RBB), a commercial bank under the ownership of Formal His Majesty's Government of Nepal was Established. Thereafter, HMG/N adopted open and liberalized polices in the mid 1980s reflected by the structrucal adjustment process, which included privatization, tariff adjustments, liberalization of industrial licensing, easing of terms of foreign investment and more liberal trade and foreign exhange regime was initiated. with the adoption of liberalization policy, there has been rapid development of the domestic financial system both in terms of number of financial institutions and as ratio of financial assets to the GDP.

IN the end of july 2005, the number of A class, commercial banks was reached 17 and their branches numbered was 375. A total of 60 finance and other development banks and credit cooperatives have also been established. Total financial assets in 2004/2005 reached around 54.09 percent of GDP and the M2/GDP ratio, which shows the financial sector development of financial deepening increased from in 12.4 percent in 1975 to 50.9 percent in 2000.

As the end of January 2012 A.D. the given commercial Bank and financial institution are availabale.

• COMMERCIAL BANK-32
• DEVELOPMENT BANK-88
• FINANCE COMPANIES- 70
• MICRO CREDIT DEV. BANKS- 24
• NGOs- 36
• CO-OPERATIVE- 16
• LIFE INSURANCE- 8
• NON-LIFE INSURANCE- 16
• NEPAL STOCK EXCHANGE-1
• LIFE AND NON LIFE INSURANCE-1
• REGISTERED BROKERAGE-48
• MERCHANT BANKERS-14

Importance

· Bank provide security to the deposits of the general public and organization on one hand and pays interest on such deposits on the other and encourage saving.

· Banks provide a number of agency services to their clients/ customer

· Banks takes responsibilities for marketing the shares, debentures and other securities issued by the government.

Types of Bank in Nepal

• · Central Bank
• · Commercial bank
• · Development bank

Central Bank:- The bank which holds the top most position in the banking sector and slowly energies the rights o issuing notes, managing cash and credit system, controlling foreign enchant and formulating banking policy for the development of banking sector in the interest and welfare of the public . Nepal rastra bank is the central bank of Nepal which was established in 2013 BS under Nepal rastra bank Act 2012 with 1, 00, 00,000 of authorized capital.

· The central bank of a country issues coins and paper notes which facilities in the transfer of properties.

Functions:-

· Issued of Note

· Working as the government bank

· Management of credit

· Management of foreign currency

· Development of banking system

· Development of industrial and agricultural sectors.

# Monetary policy of Nepal

http://www.nrb.org.np/ofg/policy.php?tp=monetary_policy&&vw=15

# Other Policy

http://www.nrb.org.np/ofg/policy.php?tp=other_policy&&vw=15

# Guidelines and Manuals

http://www.nrb.org.np/ofg/manuals.php?tp=manuals_guidelines&&vw=15

# Acts of Nepal Rastra Bank

http://www.nrb.org.np/lgd/acts_ordinances.php

# Rules and By laws

http://www.nrb.org.np/lgd/rules_bylaws.php

SOME INFORMATION ABOUT CENTRAL BANK OF NEPAL

Name :- Nepal Rastra Bank

Established :-1956

Vision:-To become a "Modern, dynamic, credible and effective Central Bank"

Mission:-To maintain micro-economic stability through sound and effective monetary, and foreign exchange and financial sector polices

Address

Nepal Rastra Bank
Central Office
Baluwatar
Kathmandu, Nepal
P. O. Box 73
Phones: 977 1 4410158 FREE 977 1 4410158, 4410201, 4411250
977 1 4419804 FREE 977 1 4419804, 4419805, 4419807
Fax: 977 1 4410159

Nepal Rastra Bank
Banking Office
Thapathali
Kathmandu, Nepal
Phone: 977 1 4226832 FREE 977 1 4226832, 4241557
Fax: 977 1 4227378

DISTRICT OFFICES:

Nepal Rastra Bank, Biratnagar
Morang
Nepal
Phone: 021 526522
Fax: 021 526519

Nepal Rastra Bank, Janakpur
Dhanusa
Nepal
Phone: 041 520362
Fax: 041 520302

Nepal Rastra Bank, Birgunj
Parsa
Nepal
Phone: 051 522598
Fax: 051 521902

Nepal Rastra Bank, Pokhara
Kaski
Nepal
Phone: 061 520115
Fax: 061 521561

Nepal Rastra Bank, Siddharthanagar
Rupandehi
Nepal
Phone: 071 520344
Fax: 071 520189

Nepal Rastra Bank, Nepalgunj
Banke
Nepal
Phone: 081 520683
Fax: 081 520226

Nepal Rastra Bank, Dhangadhi
Kailali
Nepal
Phone: 091 523172
Fax: 091 521322

Official website :- http://www.nrb.org.np

Commercial bank:-Commercial bank refers to that bank which accepts deposits of the public and organization, grants loan to them against securities, providing financial and technical assistance to the traders and commercial parties. As you know the first commercial bank of Nepal was Nepal bank limited, second was Nepal Rastra Bank and the third commercial bank was Nepal Arab Bank ltd (Now it is Nabil Bank) in 1984.

There are also other joint venture banks like Nepal indosuez Bank ltd.(Now called as Nepal investment Bank) Nepal Grindlays Bank ltd (now called as Standard Chartered Bank Nepal).

Function

• -Commercial banks collect capital in terms of the deposit of the general public and mobilize to the productive fields to activate the entire economic sector.
• -Commercial banks issue various credit instrument like cheque, bank draft, traveler’s cheque, credit cards, letter of credit etc. that assure fast and safe remittance of money.
• -Accepting deposits
• - current A/c
• -Saving bank a/c
• -Fixed deposit a/c
• -Providing loan
• -Serving with agency function
• -Exchanging foreign currency
• - Transfer of Money.
• - Providing guarantee on the behalf of client
• - Issuing capital

Future of Commercial Bank of Nepal

The present development and remarkable progress is not the optimum aim of the banking industry. The continuous changes which is taking place in the banking industry. The continuous changes which is taking place in the economic and financial milieu of the country, the areas needing special attention for improvement in the commercial banking sector are the following :

• Ensuring that the banks attract quality management and service.
• Protecting and building up their deposit base.
• Building their capacity for creating products in different areas of operation:
• Strengthening their ability to manage credit in a second way as well as maintaning compatibility to the privatisation, joint ventures, industrial policies of the country etc
• Enhancing their ability for providing services as per customer needs.

In such a situation, the role of the commercial banks can not be under emphasised due to it's significant contribution in the development of nation's economy as well as it's growing importance to enter in those sectors to fulfill the demand of the customers where services are inadequately served or not reached.

#Note:- list of commercial bank of Nepal are given below in Table

Development Bank

Industrial development bank:-

The bank which is established for the development of industrial sector by providing financial, technical and administrative and other necessary assistance is known as development bank.

Function

• · NIDC provides medium term and long term loan to the industries, against securities for the development of bank.
• · It helps industrial enterprises in collecting capital by selling their shares and debenture to different persons and organization in capital market.
• · It provides guarantee to the third parties the money lender bank or merchant on the behalf of its client.
• · It also performs general banking transaction with other national and foreign banks, specially for the benefit of the industrial undertaking.
• · It organizes industrial seminar, workshop, training etc. and assist the industrial also and govt. by providing necessary suggestion and advice for the betterment of industrial sector.

#Note:- list of Development bank of Nepal are given below in Table

Agriculture development bank (ADB)

The bank which is established for the development of agricultural sectors by imitating the modern system and methodology through financial, technical and administrative assistance is known as ADB.

Functions:-

• · Providing agricultural products.
• · Providing loan for farm development.
• · Providing loan for selling agricultural products.
• · Providing loan to the tenants.
• · Commercial function.

1. Standard Finance ltd. has been merged with Machapuchhre Bank ltd.

2. With Global Bank ltd., IME Financial Institution ltd. and Lord Buddha Finance ltd. has been merged with new name "Global IME Bank ltd.

1. Uddyam Development Bank Ltd. is now merged with Pashupati Bikash Bank Ltd. and changed the name.

2. Shikhar Finance Co. Ltd. is merged with Kastamandap Deveploment Bank Ltd. 8 .Upgraded from 'C' class Financial Institution , Annapurna Finance Co. Ltd.

3. Universal Finance Co.Ltd. is merged with Business Development Bank Ltd. and changed the name.

4. Swostik Merchant Finance Company Ltd. is merged with Infrastructure Development Bank Ltd.

5. Suryadarshan Finance Co. Ltd. is merged with Annapurna Development Bank Ltd. and changed the name.