Regulatory System of Central Bank of Nepal – Nepal Rastra Bank

The regulatory system of the central bank of Nepal, Nepal Rastra Bank: – Find here the information about the Regulatory System of Central Bank of Nepal- Nepal Rastra Bank. Nepal Rastra Bank is a central bank of Nepal. Nepal Rastra Bank is the supreme financial institution of the country.

The regulatory system of the central bank of Nepal, Nepal Rastra Bank

Nepal Rastra Bank was established as the nation’s central bank under the Nepal Rastra Bank Act (2012) in 2013 B.S. Nepal Rastra Bank (NRB) is a nonprofit organization fully subscribed by the government of Nepal.

The government of Nepal has empowered the Nepal Rastra Bank by law to regulate, supervise, and monitor the banking sector for a better economic environment.

The regulatory system of the central bank of Nepal; Nepal Rastra Bank is concerned with the formation of rules, by-laws, directives, order or circulars to be provided by the central bank. Section 79 subsection (1) of the NRB Act 2058 provides that the bank shall have full power to regulate the functions and activities of commercial banks and financial institutions.

The Commercial Bank Act 2031, Development Bank Act 2052, and Financial Company Act 2042 have also provided power to the central bank to formulate the rules or directives.

It is the duty of the bank or financial companies to abide by the directives provided by the central bank. According to the data recently published by Nepal Rastra Bank, there are 28 commercial banks, 58 development banks, and 79 financial companies operating under Nepal Rastra Bank.

The increased number of banks indicates the increased responsibility of Nepal Rastra Bank. NRB mainly provides the following directives relating to the:

1. The minimum deposit to be made in the central bank by the commercial development banks and financial institutions.
2. Cash deposits vault.
3. Sectoral arrangements of investment by those institutions.
4. The bases to be followed by the institutions to operate the bank
5. Monetary and credit system etc.

Need to be regulated by the Nepal Rastra Bank

Why do banks need to be regulated? It is the main question. Here are the main keys relatives of Nepal Rastra Bank regulations. The basic reasons for commercial banks to be regulated are:

1. Regulation protects depositors’ funds and protects all consumers against loss.
2. Regulation is helpful in minimizing the negative impact of bank activities on deposits, loans, and investment.
3. Regulation is useful in checkmating the manipulation of banks by public agents and vice-versa.
4. Regulations develop public confidence towards the bank.
5. Regulation ensures equal opportunities and fairness in public access to financial services.
6. Regulation demoralized excessive money creation and inflation.
7. Regulation advantages disadvantages to economic sectors.
8. Regulations ensure customers about financial services are provided to them at a reasonable cost.