Development of Banking System in Nepal – Banking Notes

banking system development in Nepal

The banking system development in Nepal began late compared to other developed countries. The official banking system was started in 1933 BS (1877 AD) with the establishment of Tejarath Adda. But before that, different rulers of Nepal have started some kind financial institutions. The banking development of Nepal can be divided into three phases. Ancient, Middle age and modern banking system.

Ancient Banking in Nepal Before (1877 AD)

  • During Malla regime, a community called Tankadhari (those who have money) used to lend the money to needy people.
  • During the Prithvi Narayan Shah tenure, Kaushi Toshakhana was established to look after the financial management of the regime.
  • Chandra Shamsher established ‘Satahikhana’ under “Mulukikhana” for facilitating exchange between Nepalese rupee and Indian rupee.

Middle Age to Modern Banking System (After 1877)

  1. In 1933 BS, fully government owned, Tejarath Adda was established during the tenure of prime minister Ranodeep Singh. Loans used to advanced to public against gold and silver. But very limited people used to get credit facility with 5% interest rate. No deposit was collected from the public.
  2. In 1989 BS, Taksar Adda was established that issued coin for the first time in Nepal.
  3. In 1994/07/30 BS, Nepal Bank Limited was established as per the Nepal Bank Act 1994. Nepal Bank is the first commercial bank of Nepal. After its establishment, Nepal Bank started to work as central bank of Nepal except issuing notes and coins.
  4. In 2002/06/01 BS, Sadar Mulukikhana issued first bank note of Rs. 5,Rs. 10,Rs. 100 for the first time in Nepal. This note is known as old print.
  5. In 2013/01/14 BS, Nepal Rastra Bank was established under the Nepal Ratra Bank Act 2012. Nepal Rastra Bank is central bank of Nepal. NRB issued bank note of Ra. 1, Rs. 5, Rs.10, Rs. 100 in 2016/11/17 BS while Himalaya Samsher JRB was governor. This note is known as new print.
  6. In 2013/12/20, Bakhanpur Sahakari was established. (Since then, Sahakari Day is being celebrated on Chaitra 20).
  7. In 2014 BS, Nepal Industrial Development Bank was established. Later in 2016/03/01 NIDB was converted to Nepal Industrial Development Corporation. NIDC is first development bank of Nepal. In 2073/01/19, NIDC was merged with Rastriya Banijya Bank.
  8. In 2022/10/10 BS, Rastriya Banijya Bank (RBB) was established as per the RBB Act 2021 as second commercial bank in Nepal.
  9. In 2024/10/07 BS, Agriculture Development Bank (ADB) was established as per the ADB Act 2024. In 2062/03/31 BS, ADB was converted to Agriculture Development Bank Limited (ADBL), and got the license of commercial bank in 2062/12/03.
  10. In 2025 BS, banking promotion committee was formed.
  11. In 2031 BS, commercial bank act os issued. In the fiscal year 2032/33, small farmer development project (program) was initiated.
  12. Hulak Bank was started in 2033 BS.

After Liberalization

  1. Nepal adopted open economic policy from FY 2040/41. After the adoption of open economic policy and economic liberalization, many private banks stated to establish in Nepal.
  2. In 2041/03/29 BS, Arab Bank Limited (Now Nabil) was established. Arab Bank is the first joint venture bank in Nepal.
  3. In 2042/11/16 BS, Nepal Indosuez Bank (Now Nepal Investment Bank Limited) was established.
  4. In 2043 BS, Nepal Grindlays (Now Standard Chartered Bank Limited) was established. 
  5. In 2049 BS, Purbanchal Bikash Bank was established with the objective of proving banking service in rural sector.
  6. In 2049/04/11 BS, Nepal Awas Bikash Bitta Company was established.
  7. In 2057 Mangsir, Nepal Rastra Bank have implemented comprehensive Financial Sector Reform Program.
  8. In 2058 BS, Sana Kisan Bikash Bank was established.
  9. In FY 2066/67, the total number of BFIs (A,B,C,D Category) reached 257.But despite of increasing number of BFIs in the country, still they lack in providing quality banking service. So, in order to reduce number of banks and increase the service, Merger Policy 2068 was issued to facilitate the merger process. Merger policy alone was not enough so Acquisition policy 2070 was issued. Later, in 2073, both these policies are combined and Merger and Acquisition Policy 2073 was formulated.
  10. As of 30 Chaitra 2078, following are the number of BFIs in Nepal after merger and acquisition.
CategoryNumber
Commercial Bank27
Development Bank17
Finance Companies17
Microfinance65
Infrastructure Bank1
TOTAL127
Others15 (For hire purchase purpose)

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