Economics · Chapter 6
Study notes aligned to the official NEB syllabus.
A bank is a financial institution that accepts deposits from the public, lends money to those who need it, and provides a range of other financial services. The banking system is the backbone of a modern economy, because it mobilises savings, channels them into productive investment and controls the supply of money and credit. This chapter explains the origin and classification of banks, the functions of central and commercial banks in the Nepalese context, the money and capital markets, and monetary policy.
The word bank is believed to have come from the Italian word banco, meaning a bench, because early money lenders in Italy carried out their business sitting on benches in the market place. Modern banks in Nepal are classified by function and by the class licence issued by Nepal Rastra Bank. The main types are the central bank, commercial banks (class A), development banks (class B), finance companies (class C) and microfinance financial institutions (class D). In addition there are cooperatives and other specialised institutions.