History of Modern Banking in Nepal

July 20, 2020 | Investopaper

The modern banking in Nepal started with the establishment of Nepal Bank Limited. His Majesty King Tribhuvan inaugurated Nepal Bank Limited on Karthik 30, 1994 B.S (November 15, 1937 A.D).

Nepal Bank Limited-First Bank Of Nepal

Nepal Bank is the first bank of Nepal and was formed as the joint venture between the government and the private sector. The bank was the only financial institution of the country until the formation of Nepal Rastra Bank in 2013 B.S. (1956 A.D).

Established in 1994, Nepal Bank had authorized capital of Rs. 1 crores during its inception. Likewise,it had Rs 25 lakh as the issued capital and Rs. 8.42 lakh as the paid-up capital. The bank floated equity shares worth Rs 25 Lakh, but was successful only in raising Rs. 842,000. There were only 10 shareholders when the bank first started.

The government of Nepal has 51 percent ownership of the bank. Whereas, the general public possess 49 percent shares in Nepal Bank.

Nepal Rastra Bank As The Central Bank Of Nepal

Under Nepal Rastra Bank Act 2012, the central bank was established in Nepal in 2013 B.S named ‘Nepal Rastra Bank’. It issued the Nepalese note/currency for the first time in 2016 B.S.

The primary functions of the central bank since its inception include:

— To formulate necessary monetary and foreign exchange policies to maintain the stability in price and consolidate the balance of payments for sustainable development of the economy of Nepal

— Develop a secure, healthy and efficient system of payments

— To make appropriate supervision of the banking and financial system in order to maintain its stability and foster its healthy development

— To further enhance the public confidence in Nepal’s entire banking and financial system.

Also Read: History Of Insurance In Nepal

Nepal Industrial Development Corporation

Industrial Development Centre was established in 2013 B.S which was transformed into Nepal Industrial Development Corporation (NIDC) in 2016 B.S.

NIDC operated as the national level development bank. Its primary objective was to expand Nepalese industries and commerce.

NIDC merged and started joint operation with Rastriya Banijya Bank from Baisakh 19, 2075 B.S (May 2, 2018) under the name of Rastriya Banijya Bank.

Also Read: Merger/Acquisition By Commercial Banks In Nepal

Agricultural Development Bank Limited

A cooperative bank was established in the year 2020 under the Cooperative Banks Act, 2019. Later in Magh 7, 2024, the cooperative bank was converted into Agricultural Development bank Limited. It was formed to induce the development of agriculture sector in Nepal.

Previously, it only focused on contributing substantial agricultural credit supply to the farmers. However, since 1984, it is also involved in commercial banking operations and provides commercial banking services. The bank has 51 percent share of Government of Nepal and 49 percent of general public.

Rastriya Banijya Bank Limited

Rastriya Banijya Bank Limited was established on Magh 10, 2022 B.S (January 23, 1966) under the Rastriya Banijya Bank Limited Act 2021. AT present the bank is operating under Bank and Financial Institution Act ( BAFIA ) and Company Act (CA) 2063. At its inception it had the authorized capital of Rs 1 crores.

Entry Of International Banks

After the liberalization policy, Nepal Arab Bank (now called ‘Nabil Bank’) was established in 2041 B.S (1984 A.D). It is the first joint venture bank of Nepal. It was followed by two foreign joint venture banks, Nepal Indosuez Bank (Nepal Investment Bank Limited) and Nepal Grindlays Bank (Standard Chartered Bank Limited) in 1986 and 1987 respectively.

Within a decade of the inception of Nabil Bank, 7 more commercial banks were established. Similarly, 4 commercial banks were established from the period of 2051 B.S. to 2063 B.S.

Present Status

The current financial system of Nepal includes central bank, commercial banks, development banks, finance companies, microfinance companies , cooperatives licensed by the Nepal Rastra Bank to conduct limited banking business and non-governmental organizations doing microfinance business.

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Currently, the existing banks and financial institutions in the banking sector of Nepal are divided into four categories namely ‘A’, ‘B’, ‘C’ and ‘D’.

The banking sector in Nepal has witnessed a rapid change in recent years. With introduction of new technologies in banking, the financial access has also grown substantially. After Kumari Bank started e-banking services in 2002, the era of internet banking flourished. Laxmi Bank followed Kumari Bank with its mobile (SMS) banking in 2004. Since then, there has been swift changes in the way banking is done in Nepal.

Banking History

Central Bank of Nepal: Nepal Rastra Bank

Nepal’s first bank: Nepal Bank Limited

First development bank: Nepal Industrial Development Corporation

Nepal’s first rural development bank: Eastern Rural Development Bank

Largest commercial bank In Nepal: Global IME Bank (In terms of Paid-Up Capital)

First private sector joint venture commercial bank: Nepal Arab Bank (Nabil)

Nepal’s first regional commercial bank: Lumbini Bank

Nepal’s first commercial bank established with full investment of Nepali private investors: Lumbini Bank

First bank to introduce ATM machine and debit card in Nepal: Everest Bank

First bank to launch internet banking service in Nepal: Kumari Bank

Bank to introduce credit card in Nepal for the first time: Himalayan Bank

First bank to use Multi Currency Card in Nepal: Century Commercial Bank

First bank to use Robert in Nepal: Nepal SBI Bank

New commercial bank in Nepal: Century Commercial Bank

Date Of Establishment Of Commercial Banks In Nepal

S.No.	Name Of Banks	Operation Date (A.D.)
1	Nepal Bank Ltd.	11/15/1937
2	Agriculture Development Bank Ltd.	1/21/1968
3	Nabil Bank Ltd.	7/12/1984
4	Nepal Investment Bank Ltd.	3/9/1986
5	Standard Chartered Bank Nepal Ltd.	2/28/1987
6	Himalayan Bank Ltd.	1/18/1993
7	Nepal SBI Bank Ltd.	7/7/1993
8	Nepal Bangladesh Bank Ltd.	6/6/1994
9	Everest Bank Ltd.	10/18/1994
10	Kumari Bank Ltd.	4/3/2001
11	Laxmi Bank Ltd.	4/3/2002
12	Citizens Bank International Ltd.	4/20/2007
13	Prime Commercial Bank Ltd.	9/24/2007
14	Sunrise Bank Ltd.	10/12/2007
15	Century Commercial Bank Ltd.	3/10/2011
16	Sanima Bank Ltd.	2/15/2012
17	Machhapuchchhre Bank Ltd. *	7/9/2012
18	NIC Asia Bank Ltd. *	6/30/2013
19	Global IME Bank Ltd. *	4/9/2014
20	NMB Bank Ltd. *	10/18/2015
21	Prabhu Bank Ltd. *	2/12/2016
22	Siddhartha Bank Ltd. *	7/21/2016
23	Bank of Kathmandu Ltd. *	7/14/2016
24	Civil Bank Ltd. *	10/17/2016
25	Nepal Credit and Commerce Bank Ltd. *	1/1/2017
26	Rastriya Banijya Bank Ltd. *	5/2/2018
27	Mega Bank Nepal Ltd. *	5/13/2018