Banking impacts in context of economic structure and growth of Nepal

1. TEXAS COLLEGE OF MGMT & I.T.
MITRAPARK
PEMBA SYANGBO
BBA 8TH SEMESTER
AUGUST 20, 2019
Impact of Banking sector
on economic structure & growth in context of Nepal

2. Introduction
Bank and financial institutions have been operating as the backbone of our
country from many decades. With the introduction of banking in Nepalese
economy, there have been tremendous improvement and changes to the economic
scenario of Nepal.
Here, we discuss banking contributions to shape our country’s economic
structure and growth.
Explanation
Banking and financial sector has been a great boon for our economic
upliftment and prosperity.
Evolution of Financial System in Nepal (at a glance)
1994 BS • Establishment of NBL
2012 BS • Establishment of NRB under Nepal Rastra Bank Act 1955
2016 BS • NIDC brought the concept of Development Banks in
2025 BS • Insurance Act
2040 BS • Securities Exchange Act 1983 was introduced followed by establishment
of Securities Exchange Commission
2048 BS • NIDC Capital Markets introduced first Mutual Fund
2050 BS • Merchant Banking Act 2050 was introduced
• SEBON and NEPSE was established under the Securities Exchange Act
1983 • Establishment of Nirdhan Utthan Development Bank
The real banking system was started in 1994 BS, with the establishment of Nepal
Bank Limited by the Juddha Shamsher.

3. Later on, NRB started having King Mahendra as the first depositor with it in 2012
B.S.
Category Quantity
1. Central Bank 1
2. Commercial Banks 28
3. Development Banks 32
4. Finance Companies 24
5. Infrastructure Development Bank 1
6. Micro-Credit Development Bank 4644
As per khalti.com/list-of-banks-in-Nepal
With 54 years of operation in the Nepalese market, NRB has deposit of 1.81
kharba and Lending of 1.31kharba of the Nepalese People.
The current loan schemes offered by NRB for economic growth consists of
• Entrepreneurial loan
• Agricultural and Poultry Loan
• Earthquake rehabilitation Loan
• Higher education loan
• Women entrepreneurial Loan
• Backward class development loan
• Loan for citizens return from Foreign employment
These loan schemes have been playing vital role in improving the living standard
as well as economic situation of Nepal.
NRB has been controlling and monitoring overall banking and financial
activities in the country. It is the monetary, regulatory and supervisory authority of
banks and financial institutions.
Such activities have been improving continuously in the context of our country.
Traditional practice of keeping our money in our old locker and safe area inside the
house has been made extinct through the emergence of banks in our country.
Saving habits of Nepal has been improved as a result of it.

4. Winning over customers traditionally meant extension of the bank.
As Bill Gates said in 2008, “banking is essential, banks are not”, But with the
introduction of concepts such as Branchless Banking, Digital Banking, Online and
Internet banking etc. banks have reached to much more level now.
Various beneficial services such as mobile banking, e-wallets, POS machines
and Point of Transactions (POT), Electronic Cheque Clearance (ECC), Interbank
Payment System (IPS) and SWIFT (Society for Worldwide Interbank Financial
Telecommunication) are introduced in the market to provide each and every
individual easy access to the banking facilities.
khalti getting approval from NRB for operating online transaction
Prahladraj Kunuwar (managing director of hotel himalaya) says online payment
had made financial transaction much more convenient to its business operation.
With all these advancements in banking sector, Nepal got its first female CEO of
an A-class bank in Nepal, Anupama Khunjeli at Mega Bank. Women
empowerment and involvement reached its next level in banking sector.
It also lead towards all-female branch firstly in Tripureshor in 1989 and later on at
Kapan in 2011 and Kamalpokhari in 2014 in Agriculture Development Bank.
Now, most urban branches of Agriculture Development Bank have close to 70 and
even 90 percent women employees, says Anil Upadhyay, current CEO of the bank.

5. all-female branch of ADB, Tripureshor
Nepal Rastra bank has made it mandatory for banks and financial institutions to set
up a corporate social responsibility (CSR) fund and allocate at least one per cent of
their net profit.
Nepal Bank Limited Donated Rs. 50 Lakhs to a School (Nepal Rastriya Pra. Bi) in
Bara on 27 may 2019.
Salary of workers to be paid compulsorily through banking channel to promote the
employer ‘s as well as employee’s involvement in banking sector frequently.
According to the Labor bylaw2018, an employer must contribute to the social
security fund of the employee as per Social Security Act, 2017.
Limitations
Regardless of the numerous benefits provided by the banking and financial
sector, there still exists room for improvement to yield better results.
People still finds bank as a hectic and sluggish sector. For a minor task too,
there requires lots of paperwork, time consumption and approval of concerned

6. authority e.g. deposit in case of peak hour. Concept of service proliferation is also
found lacking in government banks as well as in some private banks.
Central Bank, being powerless, to address the increasing interest rate has
also brought huge negative impacts towards the investors. In such situation, central
bank Deputy Governor, Chinta Mani Siwakoti, NRB would only take action if
their spread rate exceeds by 5%.
Absence of Banks in Siraha district also had negative consequences to its
local people. Banking channels are not present in municipalities like Dhangadimai,
Kalyanpur and Karjanha, and Bariyapati, Naraha, Aurahi, Arnama and Nabarajpur,
among other rural municipalities. To carry out financial transactions, people from
rural municipalities and municipalities are forced to visit major centres such as
Lahan, Mirchaiya and Golbazaar.
Ncell profit repatriation also brought major shock in the banking sector of
Nepal. Nepali banks in which the company has deposited funds have raised the
interest rate on fixed deposits and other deposit schemes to maintain the credit to
core capital cum deposit (CCD) ratio.
On the recent advertisement of NRB local people also expressed their feeling.
“मिस नेपाललाई बोल्न लगाएर िात्रै हुँदैन मन,RBB का किमचारीहरुले बैंकिा आउने
सर्मसाधारणलाई गने व्यर्हारिा सुधार गनम अती जरुरी छ,ATM को service पमन त्यमत राम्रो
छै न,स- साना कु राहरुिा ध्यान जाआेे स्,अमन िात्र िनिा बस्न सक्छ बैंक । धन्यर्ाद!!! “
FINDINGS
For a country like Nepal, with a literacy rate of 64% and 60% of the
population is still without a bank account, it is a challenge for the regulators and
market players to promote banking reach in every corners of the country.
But still, World Bank has projected Nepal’s economy to grow at 6.4 per cent
in fiscal 2018-19 while ADB and IMF have both forecast a 6.3 per cent growth.

7. CONCLUSION
So, with all these resources and research, we came to know banks and
financial institutions have been the integral part of the Nepalese economy.
“Rather than being populist, the government should focus on implementing
policies, generating employment opportunities, establishing a culture of respect for
labor, developing infrastructure and enhancing the capacity of the three tiers of the
government so that the country can achieve competitive development and
economic growth,” said former finance minister Ram Sharan Mahat.
Therefore, with the establishment of stable government and the rise of
charismatic people like Kulman Ghising, our country and its economy has been
more optimistic than it was ever before. We simply cannot imagine the
BANKLESS scenario at the present moment. We need Banks and Bank needs us.
The end…