History of Central Banking System in Nepal

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History of Central Banking System in Nepal

The history of central bank in Nepal has a gradual continuous process of growth. Nepal Rastra Bank was established as the national central bank under the Nepal Rastra Bank Act, 1955 on April 26, 1956 with objectives of supervising, promoting and directing the functions of commercial banking activities. Nepal Rastra bank is a non-profit organization fully owned by the government.

As the national central bank, this Bank has the sole right to issue currency notes and coins and is responsible to manage the country’s foreign exchange reserves. Nepal Rastra bank started issuing currency only in 1959.


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Central bank in Nepal is Nepal Rastra Bank that is an autonomous and corporate body having perpetual succession. However, the Bank’s Act states that Government of Nepal, after consultation with the Governor can give such directions to the Bank as may be necessary in the national interest. The Bank has a pivotal role in the country’s economic system in which no other organization is likely to substitute it. NRB is the highest monetary authority of the country. The Bank’s activities on the whole are directed towards the financial and economic growth of the country. Thus, Nepal Rastra Bank works in close collaboration with Government of Nepal so that the monetary and financial policies formulated by the Bank do not contradict with the plans and programmes of the Government.

At present, the functions and responsibilities of Nepal Rastra Bank have been recast through the New Nepal Rastra Bank Act of 2002 to formulate monetary and foreign exchange policies and continued reform in the financial sector to reflect the dynamic and vibrant economy. The challenging tasks for the Nepal Rastra Bank are to redirect monetary policies and re-engineering financial system through improvement in financial sector legislative framework passing new acts like Nepal Rastra Bank (First Amendment) Act, 2006; Bank and Financial Institution Act, 2006; Insolvency Act, 2006; Company Act, 2006; Secured Transaction Act, 2006; Money laundering Control and Deposit and Credit Guarantee Acts, 2006, etc with the strategic goal of strengthening the financial sector to ensure health financial growth and economic stability. On the whole, the strong policy guidelines and leadership, commitment and adequate institutionalization of NRB are proving vital to encourage conducive and competitive financial environment in the context of growing financial globalization.


The Nepal Rastra Bank started its operations with a total number of 23 employees including the Governor and the Chief Accountant. Besides the Office of the Governor, other important departments, which operated at the initial period, were the Banking office, Accounts department, Currency issues department and the Research department. With the passage of time, various departments and offices at the central as well as regional level were set up. At the beginning of the Bank’s functioning, there was an acute shortage of trained manpower. Therefore, the Bank arranged to conduct training classes for bank employees under the supervision of senior officers of the bank. Similarly, some officers were sent abroad for training on different subjects such as investment and accounts, note issue and banking, public debt management, agricultural credit, economic planning, national accounting, statistics and on other relevant matters.

In the initial years of its operation, the Bank had to focus its attention on abolishing the dual currency system, regulating the circulation of Nepalese currency throughout the kingdom and maintaining stability of exchange rates of the Nepalese currency. For this purpose, the bank opened a number of offices and currency exchange counters in various parts of the economically active areas in the Terai regions such as Biratnagar, Birgunj, Sidhaartha Nagar and Nepalgunj. Such offices were also expanded in the hilly regions like Ulam, Bhojpur, Dhankuta, Pokhara, Palpa Baitadi and Doti. The Bank adopted the policy of gradually increasing the number of offices in the country to provide banking services to Government of Nepal and to limited extent to the public. The recruitment of staff corresponded to the expanding number of offices and widening of the activities of the Bank’s Central Office.

History of Central Banking System in Nepal

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Author: Jitendra Sahayogee

I am Jitendra Sahayogee, a writer of 12 Nepali literature books, film director of Maithili film & Nepali short movies, photographer, founder of the media house, designer of some websites and writer & editor of some blogs, has expert knowledge & experiences of Nepalese society, culture, tourist places, travels, business, literature, movies, festivals, celebrations.

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