Central Banking System in Nepal – Nepal Rastra Bank
This post is about central banking system in Nepal – Nepal Rastra Bank. As we all know that central bank of Nepal is Nepal Rastra Bank.
A bank is an organization, the major function fo which is to deal money and credit. The main function of business of a bank is to pool the scatted idle deposits in the public and channel it for productive use. It collects deposits and invests or lends to those who land in need of money. Hence its’ responsibility towards the public is different than those who are in other type of trades and service. Modern day bank exhibit the trait more of a department store with a wide range a financial products to offer.
In every sovereign independent state central bank is a very important financial infatuation. The central bank is called as supreme bank, bank of bank as well as bank of government. It is the centre of the financial system. It controls various other financial institutions, publishes monetary policy, provides liquidity in the time of crisis, and accepts deposits and loans to government.
According to de Kock’s ‘a central bank is a bank which constitutes the apex of the monitory and banking structure. It is the lender of the last resort and has monopoly in note issue.’
In Nepal, Nepal Rastra bank (NRB) the governing body of banking and financial institution has categorized the bank and financial institution in four distinct categories. i.e. A Class, B Class, C class and D class institutions. Under A class, there are commercial banks, under B class, there are development banks, under C class there finance companies and under D class, there are micro finance development banks. These categories differ according to capital and service provided by them. Some, saving and credit co-operatives have right to do banking activities like deposits and lending from approval of Nepal Rastra bank but these have to be registered under co-operative act, not under banking act.
In case of Nepal, Nepal Rastra Bank (NRB) was established in Baishakh 14, 2013 with primary objective of the use of Nepalese currency in place of Indian currency and started issuing currency from 7th Falgun 2016 for the first time. Nepal Rastra bank is central bank in Nepal.
Nepal Rastra bank (NRB)Â is bankers’ bank in Nepal because all other banks and financial institutions are established with the permission of this bank. It issues directives and policies to these banks. In addition, commercial banks deposit certain percent of amount of their total deposit cash reserve ratio. The Nepal Rastra bank has established banking development bank in all districts of Nepal. it encourage the common people to deal with bank by communicating the banks activities. It provides loans to commercial bank, agriculture development bank and Nepal industrial development corporation to regulate and develop banking system.
Nepal Rastra bank (NRB)Â acts as lender of last resort to commercial bank. It commercial bank can not utilize their resources for returning back public deposit then Nepal Rastra bank provide loan to these commercial bank as lender of last resort.
Nepal Rastra bank acts as clearing house for transfer and settlement of mutual claims. It facilitates to transfer fund from one bank to another bank as clearing of cheques, drafts and other similar means. The commercial bank gets this facility after opening account in Nepal Rastra bank (NRB).
Nepal Rastra bank tries to control over credit. The commercial banks try to flow loan as maximum interest to earn maximum profit. The save from policy, fixes the limitations of loans and control the loan and money by using the instrument that changes the interest rate.
Nepal Rastra bank regulates, inspect and surprise over commercial banks and financial institution publishes the data of these bank and financial institutions.
Therefore, impact of Nepal Rastra bank over all other commercial bank is so high that commercial banks need Nepal Rastra bank in each and every step.
