central bank is the father of all banks, main regulatory body of the nation which control and regulate all the banks of the country. central bank is the financial advisor to the government.

2. Presentation Overview
 Introduction
 Objectives of Central Bank
 Functions of Central Bank
 Role of Central Bank
 Monetary tools of the Central Bank
 Effects of Monetary tools on various
economic variables
 Money and the behavior of the
central bank

3. Introduction
 Central bank, also known as reserve bank, or monetary authority, or “father of all
banks”.
 Provides financial and banking services for the government of a country and its
commercial banking system as well as implementing the government’s monetary
policy.
 Nepal Rastra Bank established in 1956, is a central bank of Nepal.

4. Objectives of Central Bank
 Regulating the economic activities- facilitate flow of funds to promote economic
activities.
 Formulate and conduct monetary policy to generate maximum economic benefits.
 Retain balanced growth, stabilize the price level and control inflation.
 Enhance foreign exchange earnings through favorable promotion of foreign trade.

5. Functions of Central Bank
 Issue of bank notes.
 Monetary policy maker.
 Banker for banks.
 Banker for the government.
 Advisor to the government.
 Regulator of the banks and financial institutions.

6. Roles of Central Bank
 Measuring leading economic variables.
 Money supply and creation.
 Foreign currency management.
 Effective debt management.
 Valuable advise to the government.
 Control and supervisions of financial institutions.

7. Monetary tools of Central Bank
 Reserve requirements: The Cash Reserve Ratio (CRR) for class “A” banks is 6%, for class
“B” is 5%, and 4% for class “C” banks and financial institutions for fiscal year 2014/15.
 Public debt policy and open market operations: As a key instrument of Monetary Policy,
“Nepal Rastra Bank Open Market Operation Bylaws 2071” has been formulated and executed to
make open market operations purposeful and transparent.
 Discount rate: Central Bank has adopted bank rate policy and discount of securities of 8%.
 Directives
 Interest rate controls

8. Effects of monetary tools on various economic
variables
1. Expansionary activities: The central bank wishes to increase the money supply, it
can do a combination of three things:-
. Purchase securities on the open market
. Lower the discount rate
. Lower reserve requirement
2. Contractionary activities: When the central bank wishes to decrease the money
supply, it can do a combination of three things:-
. Sell securities on the open market
. Raise the discount rate
. Raise reserve requirements

9. Money and the behavior of central bank
 Central bank and monetary system is interrelated.
 Central bank is an integral part of monetary system in the economy.
 Money creations and the control of money depend upon how central bank behaves
in the overall monetary policy of the economy.
 Broad money supply and narrow money supply are 8.1 % and 7.0 % respectively in
2015.