Objectives of Regulations of Central Bank of Nepal- Nepal Rastra Bank

Objectives of Regulations of Central Bank of Nepal -NRB

Find here objectives of regulations of Central Bank of Nepal -Nepal Rastra Bank. Nepal Rastra Bank (NRB) is the central bank of Nepal. The name of central bank of Nepal is Nepal Rastra Bank. NRB is the short form of Nepal Rastra Bank. Nepal Rastra Bank (NRB) is the supreme financial institution of Nepal. Nepal Rastra Bank (NRB) was established as the nation’s central bank under the Nepal Rastra Bank Act (2012) on 2013 B.S. central bank of Nepal, NRB is non-profit organization fully subscribed by the Nepal Governement. Nepal Government has empowered the Nepal Rastra Bank (NRB) by law to regulate, supervise and monitor the banking sector for better economic environment. Such power is authorized by the Nepal Rastra Bank Act, 2058. The NRB has a key role in the Nepal’s economic system in which no other organization is likely to substitute it. The NRB gives direction and regulations to the commercial banks, whenever needed for proper management of banking sector. The official website of central bank of Nepal, Nepal Rastra Bank is nrb.org.np.

The objectives of the regulation of central bank of Nepal are as given below:

1. It can change such directives to cope with the changing economic situation and government policy.
2. Regulation is essential to safeguard the people deposit made in the commercial banks and financial institutions.
3. To prevent the contagious effect, central bank acts as a lender of the last resort, which is necessary to prevent the national economy from crisis.
4. Regulations also prevent the commercial banks from performing undesired activities in view of the national economy.
5. It also helps to prevent the bank from being suffered by the several economic problems.
6. Promote efficiency of commercial bank to operate in profit.
7. Ensure adequate fund to meet all cash demands
8. Maintain clear and fraud free financial transactions
9. Record all financial transactions as per the banking rules

Regulatory system includes the formulation of rules, amendment of rules, circulation of them to the banks etc. This system is performed according to the Nepal Rastra Bank Act, 2058, and guidance of the government. For controlling other banks, central bank, generally, formulates regulations under following headings:

a. Credit control
b. Foreign exchange
c. Liquidity
d. Interest rate
e. Priority sector
f. Capital adequacy
g. Assets quality

Nepal Rastra Bank Act, 2058 has made various provisions regarding regulations. Among them some important provisions are:

1. Banks, financial institutions and individuals should get approval from Nepal Rastra Bank for deposit collection and loan advancement.
2. All institutions should determine the interest rate according to the provision made by Nepal Rastra Bank.
3. Commercial bank and financial company should receive the permission letter to conduct banking transactions.
4. Nepal Rastra Bank has the full power to take action upon banks for maintaining regulatory system.
5. Nepal Rastra Bank can issue direction, circulation and notice to maintain regulatory system.
6. Nepal Rastra Bank can issue notice to any bank and financial institution to provide financial record, profit and loss account, balance sheet and other statements.

 Objectives of Regulations of Central Bank of Nepal -NRB

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