Introduction to Nepal Rastra Bank : Central Bank of Nepal

Searching some information about Nepal Rastra Bank, a central bank of Nepal. Here we have some facts and information about Nepal Rastra Bank, central bank of Nepal. Let’s discuss about introduction to Nepal Rastra Bank.

Introduction to Nepal Rastra Bank : Central Bank of Nepal

Central bank is the regulator of banks and other financial institutions that have so far developed in number of countries that include both advanced and developing countries. In this regard, Nepal is no exception to this international phenomena regarding of how the central bank dominates the banking system in the global context. But the way how the central bank has developed in Nepal has a curious history because it came only after the development of commercial banks. Central bank has a major task and responsibility to stabilize the economic growth and financial system of the economy. Thus, all the major government fiscal, monetary and economic policies are being smoothly implemented in the country with the active support and help of the central bank.

In almost all countries, central bank is assigned with the basic tasks and responsibilities to promote the economic welfare of the country in broader perspective. This is in consonance to creating favorable and sustainable conditions of macro economic development. Considering the recent developments, Nepal Rastra Bank being the central bank of Nepal has revised its monetary policy considering the compliance of international banking standards as stated in Basel Report. Growth of commercial banks, finance companies, development banks and regulated cooperatives permitted to take limited banking functions have to follow directives and adjust capital base requirements accordingly and initiate macro credit and priority sector lending to uplift the living standards of the poor living in rural area.

Central bank is a bank that provides financial and banking services for the government of a country and its commercial banking system as well as implementing the government’s monetary policy. Examples of major central banks include the Bank of England in the UK, the Federal Reserve Bank of the USA, the Deutsche Bundes bank in Germany, France’s Banque de France and Nepal Rastra Bank in Nepal. Nepal Rastra Bank was established as the national central bank under the Nepal Rastra Bank Act, 1956 with objectives of supervising, promoting and directing the functions of commercial banking activities. Nepal Rastra bank started issuing currency only in 1959.

The Bank adopted the policy of gradually increasing the number of offices in the country to provide ranking services to Government of Nepal and to limited extent to the public. The BOD of the Bank constitutes seven members comprising of the Governor, four Directors nominated by Government of Nepal and the two Deputy Governors of the Bank. The person holding the post of Director in any commercial bank is not eligible to become the Bank’s Director.

Over the years, the NRB’s responsibilities have expanded in consonance with the increase in number of ranks and financial institutions. The departments include: (1) Kathmandu Banking Office (2) Issue Department (3) personnel Administration Department (4) Banking Operations Department (5) Development Finance Department (6) Inspection and Supervision Department (7) Foreign Exchange Department (8) The Issue Department and the Banking Department are the principal operational sub­divisions of the Bank.

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The Banking Office facilitates the clearance of cheques, pay orders and bank drafts to its member commercial banks through the operation of “Clearing House”. The main monetary control instruments of the Central Bank are reserve requirements, public debt policy and open market operations, discount rate, directives and interest rate controls. Reserve requirements may also be applied to non-bank financial institutions although it should be noted that in most financial systems non-banks do not usually maintain cash balances at the central bank. Although reserve requirements wok in a similar manner for both banks and non-banks, there is a need to draw a distinction between those institutions which hold their cash balances with the central bank and those non-bank institutions which normally hold their cash balances with the commercial banking system.

In order to prevent banks form misusing such facilities, a central bank can impose various tools of monitory control. The discount rate is thus simply the rate of interest charged by the central bank for borrowing by the commercial banks or for discounting securities with it. Similarly, open market operations and debt policy instrument can be used to control credit. Nepal Rastra Bank has to maintain good financial positions efficient management of its assets and liabilities.

Introduction to Nepal Rastra Bank : Central Bank of Nepal

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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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