Banking History of Nepal

The bank is the institution that deals with the money. The main function of the bank is to promote the trade and industry of the country by managing the demand and supply of money. The history of the banking sector of the world is started in 1100 AD. The modern banking system was started with the establishment of the Bank of Venice in 1157 AD in Italy.

Bank of Barcelona (1401 AD), Bank of Amsterdam (1609 AD), Bank of Genoa (1407 AD), Bank of Hamburg 91609 AD), and Bank of England (1694 AD)  played important roles in the development of the modern banking system in the world. The history of Banking in Nepal is not long as other country.

Early Banking Age  

Although world banking has a long history, Nepal’s institutional banking system started almost 8o years ago. Before that people ask different people for “mudra”, for example; during the Malla regime there used to be “Tankdhari” who gave money to needy people, during the age of Prithvi Narayan Saha, all financial transaction were managed by “Koishi Tosha Khana”, likewise Jang Bahadur Rana established “Mulukikhana” to manage all financial transaction.

So, Nepal had some unofficial institutions to manage financial transactions before 1994 BS, so this era is taken age preliminary age for the development of the banking system.

The Middle Age

The establishment of Nepal Bank Limited, Nepal Rastra Bank (NRB), Rashtriya Banijya Bank, and Agriculture Development Bank Limited is taken as the middle age for the development of banking in Nepal. Nepal Bank Limited was established in 1994 BS as the first bank to provide services to the general public.

This was the first bank of Nepal so this bank had to play the role of the central bank and operate the function for the government as well. Later, in 2013 BS NRB was established under the act of 2012 BS. This bank regulates all the banks in Nepal as well as this bank is known as the bank of the bank, and the bank of government.

Additionally, Rastriya Banijya bank was established in 1965 AD as the second commercial bank of the nation. And, agriculture is the major income for Nepalese people so to boost the people’s economy and modernized the agriculture sector Agriculture Development Bank Limited was established in 1968 AD.

The Modern Age

After 2022 BS, there was not established in any banks for the next 20 years, however, after the liberalization policy many financial institutions were established and some of them were joint ventures with foreign banks.

Nepal Arba Bank limited was the first joint venture bank of Nepal which was established in 2041 BS. Then after, couple joint venture bank was established which are Nepal Investment Bank Limited and Standard Chartered Bank Limited.

After the establishment of that bank, the banking sector developed so rapidly and within three decades now there are 28 commercial banks, 22 development banks, 20 finance companies, and 36 microfinance. Currently, in Nepal, the banks are divided into four categories which “A” for the commercial banks, “B” for Development banks, “C” for Finance companies, and “D” for Microfinance.

Currently, there are 22 development banks in Nepal. Nepal Industrial development corporation was the first “B” level Bank in Nepal. The main motive of this kind of bank is to provide capital to improve the people’s per capita income. Normally, there are three types of development banks which national-level bank, four-ten district bank, and one-three district bank.

Finance company established with the motto of providing investment opportunities to the lower class. Currently, there are two types of financial companies in Nepal which are national and regional. Recently, Nepal Rastra Bank increases its requirement of paid-up capital.

Now, National level finance company should have Rs 800 million of paid-up capital and Rs 400 million of capital for regional-level finance companies. Although the history of banking in Nepal is not long, the modern banking growth and its role in the Nepalese economy are crucial.

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