Concept of Banking System in Nepal

banking system in Nepal

What is a Bank?

A bank is an authorized financial institution which accepts deposits from public and provide loans. Two major functions of bank is accepting deposit and providing loans. A bank works as a bridge between surplus unit (i.e depositors) and deficit unit (i.e borrower). A bank must get license to from the central bank to operate banking operations. Nepal Rastra Bank is central bank in Nepal.

concept of bank

The goal of the bank is not to provide service but to sell the service.

Types of Bank in Nepal

The banks and financial institution in Nepal can be categorized into different types. Following are the major categories of banks in Nepal.

1. On the basis of paid up capital

  1. Commercial bank – 800 Croce (8 Arba)
  2. Development bank – 250 Croce  (2.5. Arba)
  3. Finance company – 80 Crore
  4. Microfinance – 10 Croce

2. On the basis of ownership

1. Government bank (Fully or partially)

  • Rastriya Banijya Bank –  100% government ownership
  • Agriculture Development Bank – 51% Government, 49% Public
  • Nepal Bank – 51% Government, 49% Public.

2. Private bank (non-governmental)

3. On the basis of work nature/function/purpose

  1. Central bank
  2. Commercial bank
  3. Development bank
  4. Infrastructure bank

How Many Banks are There in Nepal?

As of Chaitra 30, 2079 (April 13, 2022), there are 127 registered Banks and Financial Institutions in Nepal. Following are the category of each BFIs. These are the list of banks and financial institution after the merger and acquisition completion.

CategoryNumber
Commercial Bank27
Development Bank17
Finance Companies17
Microfinance65
Infrastructure Bank1
TOTAL127
Others15 (For hire purchase purpose)

There are 15 institutions that are registered for the purpose of hire purchase trading.


Banking Terminologies

Open banking policy –  Nepal adopted liberal banking policy (open banking policy) since 2041 BS. In open banking policy the central bank does not make any strict rules in the banking establishment and operation process. Government supports in  promoting and increase the number of banks in the country.

Controlled banking policy – On controlled banking policy, government tend to control in the establishment and operation of banks and financial institutions. Nepal adopted controlled banking policy from 2013 BS to 2040 BS. The central bank restricts in the operation of bank and establishment of new bank.


FAQs

Is Rastriya Banijya Bank (RBB) fully owned by Government of Nepal?

– Yes! Rastriya Banijya Bank (RBB) is fully owned by government. Government of Nepal has 100% ownership in RBB.

What is the ownership of government in Nepal Bank?

– Government of Nepal has 51% ownership in Nepal Bank. Rest 49% is given to general public.

What is the ownership of government in Agriculture Development Bank (ADBL)?

– Government of Nepal has 51% ownership in ADBL. Rest 49% is given to general public.

What is the minimum paid up capital required for commercial bank in Nepal? 

– The minimum paid up capital needed by commercial bank to start is Nrs. 800 crore (8 Arba).

What is the minimum paid up capital required for development bank in Nepal? 

– The minimum paid up capital needed by development bank to start is Nrs. 250 crore (2.5 Arba).

What is the minimum paid up capital required for a finance company in Nepal? 

– The minimum paid up capital needed by a finance commany to start is Nrs. 80 crore.

What is the minimum paid up capital required for a microfinance in Nepal? 

– The minimum paid up capital needed by a microfinane to start is Nrs. 10 crore.

Other Posts

  1. BAFIA 2073 Major Highlights
  2. Company Act Highlights – Banking Notes
  3. ADBL – Establishment, Development, Work Nature, Mission, Vision & Objectives
  4. What is KYC (Know Your Customer) in Banking?
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