Introduction on Bank and its History in Nepal

by - July 02, 2018




Introduction on Bank and its History in Nepal

Banks plays an important role in economy of the nation. In Nepal, in a very short time financial system has grown significantly as business organization and increase the size of market. Since the nation’s growth and development is depend upon the how well they utilize the resources and the quantity of resources available. Since the banks are able to utilize capital as resources properly in the growth of nation, there is some help in the growth of the nation’s economy and market. When we talk about Nepal, it is poor nation with lots of crises and political instability, the nation is being able to grow every financial sector such as banks, insurance organization, and financial companies. As the growth of financial sectors, it helps in growth of economy, which creates opportunities as well such as employment opportunities, capital adequacy, investment from loan, and increase in development of trade. As people finds various opportunities many students shows more interest on banking, finance and as well as establishing business and so on.

Banks are one type of financial institutions which accepts deposits and provide loans and utilize their money in organization for the growth of the economy of the nation. It deals with the debt and credits. The bank accepts deposits in the form of capital and collateral, formulates and implements monetary and foreign exchange policy in order to maintain price and balance payment. The bank works as the mediator to connect the gaps between savers and borrowers.


According to Prof. Kinley, “A bank is an establishment which makes to individuals such advances of money as may be required and safely made, and to which individuals entrust money when not required by them for use.” Which means then banks are established with the motives of securing individuals and organization money, which they do not need want to use it in a moment (Somashekar, 2009).

According to World Bank,”Banks are financial institutions that accept in the form of deposits repayable on demand or in short notice”

Function of Bank

  • Accepts Deposits
  • Provides Loan
  • Helps to form policies
  • Purchases and Sells securities
  • Issue notes
  • Creates credit
  • Exchanges foreign currency
  • Helps in rural development
  • Remits money
  • Collects incomes and pays expenses
  • Commercial Banks




Origin of Bank

The modern banking system has been started in Italy. The first bank with modern banking functions is called Bank of Venice in the Venice city of Italy during 1157 AD. The objective of establishing the bank is to finance the monarch in the war. Similarly, The Bank of Barcelona  and Bank of Genoa were established in 1401 and 1407 AD. Respectively. Establishment of the bank called Bank of England during 1694 AD with the great development in banking sector. The modern commercial banking institutions had been developed in banking sector after the enactment of Banking Act in 1833 AD, that provided freedom for establishment of commercial banks in the form of joint stock company. And fully developed about modern banking system in 19th century after development of commercial banks. 

History of Bank in Nepal

Nepal history on banking sector is not very long. However, it is believed that the banking in Nepal was started during the time of Ranoddip Singh during 1877 AD. In this period there were some financial and economic reforms. There was the introduction of Tejaratha Adda which basically means to provide credit facilities to the general public with concessional interest rate. This facility was termed to be eligible because it was being settled by deducting from the salary however, it do not accept any deposit (Karn, 2017).

Ranoddip Singh


Later, in the year 1937 (Kartik, 30th, 1994 B.S.), Nepal Bank Limited (NBL) was established for the purpose of commencing a financial institution that can fulfill the void of banking institution in Nepal with starting modern banking era. Nepal Bank Limited starts operation in Nepal under the Nepal Bank Act 1936 AD. as the first commercial bank in Nepal replacing the older system of banking with the motive to develop trade, industry and business activity in the country. Also having a primary objective to create to creation of an institution for issuing currency and ending the dual currency system which was prevalent in the Nepal in those times, Nepal Rastra Bank (NRB) was established in 1956 (Baisakh 14th, 2013) under the Nepal Rastra Bank Act 1955. It is the Central Bank of Nepal with the responsibility for formulation of monetary policy and the regulation of banking industry of Nepal (Maskay & Subedi, n d).

Central Bank of Nepal- Nepal Rastrya Bank

References


Karn, S.K. (2017). Customer service and loan activities of Nepal bank Limited – A situational analysis. In Edukrn. Retrieved from: https://edukrn.blogspot.com/2017/05/customer-service-and-loan-activities-of.html

Maskay, N.M, & Subedi, S.R., (n d). Development of the Nepalese financial system: Need for the formulation of a master plan. Retrieved from: https://nrb.org.np/ecorev/pdffiles/vol21_art2.pdf

Shareshansar,(2016). Banking history in Nepal: When were the commercial banks established in Nepal? Retrieved from: http://www.sharesansar.com/c/banking-history-in-nepal-when-were-the-commercial-banks-established-in-nepal.html

Somashekar, N. T. (2009). Banking. New Age International

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