Impact of Nepal Rastra Bank Regulations over Commercial Bank
Find here impact of central bank of Nepal, Nepal Rastra Bank regulations over all other commercial Bank. How the effect of Nepal Rastra Bank regulation over all other commercial bank can be seen. Le’s discuss about impact of central bank of Nepal over commercial bank.
Nepal Rastra Bank definition
“Central bank is a bank which constitutes the apex of the monetary and banking structure of the country.”-De Kock
functions of Central bank of the country
The primary function of central bank is to manage the nation’s money supply (monetary policy), through active duties such as managing interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis. Central banks usually also have supervisory powers, intended to prevent bank runs and to reduce the risk that commercial banks and other financial institutions engage in reckless or fraudulent behavior. Central banks in most developed nations are institutionally designed to be independent from political interference.
Introduction of Nepal Rastra Bank
As we all know that Central bank of Nepal is Nepal Rastra bank. In case of Nepal, Nepal Rastra Bank was established in Baisakh 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 is bankers of 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. Also, commercial banks deposits certain percent of amount of their total deposit cash reserve ratio. The Nepal Rastra Bank had established banking development (Prabanthan) committee which try to extend the branches of commercial bank in all districts of Nepal. It entourage the common people to deal with bank by communicating the banks activities. It provide loans to commercial bank, agriculture development bank and Nepal Industrial Development corporation to regulate and develop banking system. Nepal Rastra Bank act as lender of has resort to commercial bank. It commercial bank cannot utilize their resources for returning back public deposit then Nepal Rastra Bank (Central bank of Nepal) provide loan to these commercial bank as lender of last resort.
Impact of Nepal Rastra Bank over Commercial Bank
Nepal Rastra Bank Regulations is needed over other commercial bank of Nepal. Without Nepal Rastra Bank Regulations, commercial bank in Nepal may be mislead. There are various importance of Nepal Rastra Bank Regulations. although there are some disadvantage of Nepal Rastra Bank Regulations, but it has more advantage of Nepal Rastra Bank Regulations. Nepal Rastra Bank act 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 get this facility after opening account in Nepal Rastra Bank (Central bank of Nepal).
Nepal Rastra Bank (Central bank of Nepal) tries to control over credit. The commercial banks try to flow loan as maximum interest to earn maximum profit. The save from this, Nepal Rastra Bank fixes the bank rate policy, formulates market policy, fixes the limitations of loans and control the loan and money by using the instrument that changes the interest rate.
Nepal Rastra Bank regulate, inspect and surprise over commercial banks and financial institution also publishes the data of these bank and financial institutions.
So, impact of Nepal Rastra Bank (Central bank of Nepal) over all other commercial bank is so high that commercial banks needs Nepal Rastra Bank in each and every step.
Branch Offices of Rastra bank (Central bank of Nepal)
Banks and financial institutions are the backbone of the economic development of a country. Bank and financial institutions have promoted industrialization and economic development by channeling the public deposit into these sectors. The establishment of new bank and financial company leads more competition in the banking market. To win the competition, banks provide more facilities to the customers with modern technology. At the same time, the probability of loss becomes significant to banks, which are running behind in the competition. In case of insolvency, the public depositors as well as the shareholders of the bank may suffer significantly. It will adversely affect the overall banking sector. Therefore, the supervisory and monitoring of banks and financial institutions is essential to find out the solvency position and take corrective action in time when needed. Monitoring system is a check and follows up system, it conforms that suggestion and direction given while supervision are properly conducted or not. Central bank monitors commercial banks and financial institutions after supervision and inspection, There is a separate monitoring department under supervision department in Nepal Rastra Bank.
Based on findings of supervision, the supervisory and inspection department gives advice and instructions to the banks and financial institutions to regulate their performance. In order to see whether these advices and instructions have been properly followed or not, central bank monitors them. This is conducted through monitoring department.
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Impact of Nepal Rastra Bank Regulation over all other Commercial Bank
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