Friday, 14 March 2014

Banks & Banking in Nepal

What is Bank…??
It has been believed that the word “Bank” is derived from Latin word “Bancus” which mean “Bench”. Bench where people used to seat and operate their money related works and keep the records for the same.
  • Currency barter
  • Provide business, personal  & family loan
  • Assist in international trade.
Now speaking about Institutional wise in 1933 “Tejarath Adda” was established for the general people to make free from high interest rate charged by creditors its basic purpose was to provide credit facilities to the general public at a very concessional interest rate. It used to provide the loan @ 5 % to the Government employee having the provision of deduction from their salary. As per policy the function of tejarath adda was to provide credit to general public but not to accept deposit from the public.
The history of banking in Nepal is believed to be started from the time of Prime Minister Ranoddip Singh in 1877 A.D. he introduced many financial and economic reforms.
 The Tejaratha Adda was established at that time and its basic purpose was to provide credit facilities to the general public at a very concessional interest rate. The Tejarath Adda disbursed credit to the people on the basis of collateral of gold and silver.  All employees of government were also eligible for this type of loan, which was settled by deducting from their salary. Tejaratha Adda extended credit only; it did not accept deposits from the public.
But the real banking started with the establishment of Nepal bank limited in 1994 B.S which was founded by Judda Samsher. It was the first bank of Nepal.  Its main function was to provide loans and accept deposits. Later Nepal Rastra Bank was established as a central bank in 2013 B.S. The bank was completely government ownership bank and it also started to issues notes since 2016 B.S. Then after, several commercial banks have been established in the recent years.

As mentioned above, with the motive to develop the trade and industry in the economy commercial bank called Nepal bank limited was established in 1937 AD. It was established under the Nepal Bank Act 1936 AD. And the late king tribhuwan bir bikram shahdev inaugaurated this bank. At that time authorized capital of the bank was rs 10 million, divided in to 100000 shares of Rs 100 each. NBL has responsibility of attracting people towards banking sector from predominant sahu-mahajan's transaction and introducing other banking services as well. Being a comm bank , it was natural that Nepal Bank limited paid more attention to profit generating business. But it is the duty of the government to look into the neglected sectors. Therefore Nepal Bank limited was established with 51% ownership of His majesty Government (HMG)(Now Nepal  Government) and 49% of the equity participation from private sector. With the development of banking sector and to help the government, formulate monetary policy, Nepal Rastra Bank  was set up in 1956 AD(14th Baishakh 2013 BS) , the  central bank of the country.

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