Banking in Nepal

Banks are institution which collect deposits, provide loans, issue credit and handle various kinds of transaction in money and monetary instrument.


In Nepal bank is started in 1937 by Nepal bank limited which is the oldest bank in Nepal. From this the people of the country are started to save the money in bank and various kinds of payment and received are made through the bank and which help to keep their money safe. Banks are provided interest on the deposit amount. They are providing loan facility which help people to start their business. In our country Nepal all the banks are generated with the Central Bank. There are 298 banks in Nepal other are financial institution. There are different types of bank in Nepal and the some rule of the bank in Nepal is as:

A) Central Bank:
Central banks are the head of the every bank there is one central bank in every country. Central bank is the guardian of the entire banking system. All other banks are required to follow the instruction of central bank. It holds foreign exchange, issue note and control credit creation.
Functions of Central Bank:
-Banker to the Government
-Bankers to banks
-Note issue
-Custedian of foreign exchange and precious metals

B) Commercial Bank:
The institution which collect deposit, issue short term loan provide necessary facilities for trade and payments and various kinds of commercial services are called commercial banks.
Functions of Commercial Bank:
1) The excess of income over consumption is called saving. Such saving amounts are deposited in commercial banks. Payments for goods and services are drawn by cheques. Commercial banks pay interest on such deposits. In context of Nepal there are three kinds of deposits are mainly followed they are:
-Current deposit
Depositers can draw such deposit at any time partly or wholly. Banks are not paid interest for these deposits.
-Saving deposit
Depositers cannot draw saving deposit they need. Only limited amount can be drawn at a time. It earns interest.
-Fixed deposit
Amounts deposited for a fixed time is called fixed deposit. It is not promisible to draw any amount before fixed period expires. It earns higher interest it is because commercial banks can invest such deposits to earn profit.
Commercial banks are providing loans on interest. They are providing education, housing, vehicle, industry, business and other many more loan facility are providing to the Nepalese people which help to promote the life of illiterate people from destroy their assets.

C) Development Bank
Development banks are the specialized financial institutions that are sit up to provide loans for developmental purpose in the various sectors like agriculture, industry, service etc. The development banks also perform almost the same functions as commercial banks but they mainly focus on developmental activities. According to the data of 2007 there are 33 development banks but they are increasing in Nepal.

D) Finance Company
Finance companies are those financial institutions particularly engaged in small and short term consumer financing. The finance companies can accept deposits and extend short-term consumer loans with limited amount specified by central bank directives. The finance companies are small in size of capital and assets so that they can be established in regional (sub-regional level) where other banking institutions are not available.

The banks in Nepal are categorized in the system of Nepal Rastra Bank(NRB) they are mainly in three methods they are KA, KHA, GHA, 'ka' means the bank, 'kha' means the development bank and 'gha' means the finance company which are established with the authorization of Nepal Rastra Bank(NRB).

Important of banking in Nepal
Banking sector is the major institutional system in Nepal which carries out the financial flow within the economy. It can also be understood with the emergence of e-banking in the recent years. Banking sector is the lead economic of country. In the developing country most of people are under the poverty line. The banks should provide good and trustable facility. Now banking sector has been going to internet banking. So it is very important things are security and easiness and everywhere available facility is getting by Nepalese people. Now a day's people are getting easy facility through the internet. Banking system in Nepal are now a days in their competition and they are providing different facility to the customer like SMS banking, online banking and other many more. Due to such facility banking knowledge are forwarding to all the Nepalese people and now a days they are saving their money in bank. People of Nepal can exchange their banking work in any place due to the facility of e-banking. Banking is providing credit cards since 1990. ATM facility also famous in Nepal now a day which help to the customer it works 24 hours daily it was started in 1995. Due to the introduction of technology banking facility are popular to all the Nepalese people and they are keep their money safe for future purpose.

Banking are providing remittances facility where people from one place can send their money to his/her family members through banking safely due to the e-banking. Now a day the insurance are also very famous to Nepali and they are doing insurance. Such policy also invented by the banking of Nepal. Due to establishment of banking many people are getting job in banking sector.

ATM

ATM stands for Automated Teller Machine. It is a latest technology in world providing by the banks to their customer to withdraw cash immediately at any place. Now a day's in Nepal also it is most familiar to all the people. It is electrical use switching technology that organies digital data into 53-byte cell units and transmits them over a physical medium using digital signal technology. Individually, a cell is processed a synchronously relative to other related cells and is queued before being multiplexed over the transmission path.

It is designed to be easily implemented by hardware rather than software, faster processing and switch speeds are possible. The prespecified bit rates are either 155.520Mbps or 622.080Mbps. Speeds on ATM networks can reach 10 Gbps. Along with synchronous optical networks and several other technologies; ATM is a key component of broadband ISDN.
It is also known as a machine that bank customers use to make transactions without a human teller.

There are a growing number of banks that are providing free ATM cards to their customer. The customer who withdraw amount from the customer who have the account in that bank ATM can't cut the amount if customer are taking from other banking at that time bank are take some amount from customer account. From this kind of facility customer feel easy and they don't have to carry many amounts if they are going from one place to another place. Customers feel easy from robbing. Such facilities are providing their customer 24hr's they can take their money. In Nepal this facility was started from 1999. In this ATM machine people can take money by inserting card and and they should follow the rules and they can enter their pin number and they can withdraw their needed money easily. In Nepal at one time only Fifty Thousand amounts can draw by one person.

Historically, most banks have allowed their own customers to access their accounts with the bank for free while changing non-customers for use of their ATM. This gave banks with a large branch network a competitive advantage as banking with that bank offered the convenience of a greater number of free ATMs around the town. However branches are expensive to build and maintain and banks with few or no branches soon found that by reimbursing the fees charged to their customers when the customers use ATMs belonging to other banks, they could again the same.Competitive advantage at a much lower cost. Further, this cost could be contained by capping the amount of the fee reimbursed per transaction and or the number of transaction per month.

According to the banking with USAA Federal savings Bank which from it's beginnings a few decades ago has had customers world-wide but only one office at the USAA headquarters in San Antonio, Texas. Originally, deposits were made via mail or wire transfer and cash with draw as through other bank ATMs with USAA reimbursing the ATMs. Other banks, especially internet banks, have since followed suit and many now offer reimbursement of ATM fees.

SCT NETWORK USED IN ATM OF NEPAL

Smart Choice Technologies P. Ltd. is a company registered in Nepal and promoted by well-established entrepreneurs. The company was established2001.

The company has deployed a first-of-its-kind initiative in Nepal creating an integrated shared services network (SCT-Network) for Automated Teller machines (ATMs) and Point-of-sale (POS) Terminals, managed through a national switch. The SCT-Network is a fully integrated network supporting multiple device types and card acquiring standards.

This network has been made available, on a subscription basis (pay-per-use), to banks and financial institutions across the country. Besides the network, this national switch will also operate and manage domestic & international gateways and settlement systems. For inter-bank settlement, the company has appointed a settlement bank, which is responsible for the daily settlement of all ATM transactions on the network

The company has also launched a local debit card program (branded as SCT™) to enable banks to issue cards to customers at a fraction of the costs typically associated with international card schemes. The local debit card program offers a first-time opportunity for banks to issue and manage a local debit card program, with wide acceptability (due to the ATM & POS Network in Nepal and India and regional countries).

In addition, the company also provides a secure facility for Card and PIN production & management, customized for each bank. This facility is equipped with world standard Hardware Based Encryption (RACAL-HSM) supporting the latest technology.

The project also includes integration of ATMs and POS banks may have already invested in, and enable them to recover their investments on a significantly accelerated basis. The technology used in this project is tried and tested in many sites overseas and consequently mitigates the risk of technology failure that is typically associated with new technologies.
Now a day in Nepal the SCT network is excessively used and other are also used visa. More people are attracted from this facility and they have fill easy to their money transaction work if such facility are providing in village area of Nepal they are happier and the development of banking is increases rapidly.
The network provider for banking cards, Smart Choice Technologies (SCT) has added Bhutan's Bank as the first international bank in its network.

Money of Nepal

Money is a means, which is generally accepted as a means of payment and it possesses liquidity. It is a king of means, which is printed and acceptable to all for buying and selling goods and services. In other words, it refers to that commodity which performs as the medium of exchange goods and services, measuring value of factors of production, goods/services, common and useful means of credit transactions in business society and having quality of store of value of goods/services in the form of cash.

Types of Money
Money can be classified into various parts. On the basis of its evolution, there are following kinds of money.
1) Commodity Money
In the early days of human civilization, human society had used each and every commodity like, cattle and their bones and leathers, food grains etc as money. The commodities which are used as money, is called commodity money. The commodity money lacks the basic features of good money such as uniformity, stability, durability and transportability.
2) Metallic Money
Money made from metal like gold, silver, copper, brass, aluminum and other kinds of metal are used in coinage. This money possesses quality of good money. Such coins are known as metallic money.
The metallic money are two types they are:
-Full bodies or standard coins
If the face value and internal value are equal it is called standard coins. It is minted by precious metal such as gold, silver etc. It is minted according to coinage act.
-Token coin
If it is minted by cheaper metals such as aluminum, alloys etc. If the face value is greater than internal value it is called token coin. It is also known as subsidiary coin.
3) Paper Money
The money issued by the central bank or monetary authority of the country in the form of paper notes is called paper money. The paper money was first invented in china in 18th century. The paper money is widely used throughout the world. The paper money has the nature of unlimited legal tender so it is accepted by all. In our country Nepal there are 11 types of paper money that is Rs.1,2,5,10,20,25,50,100,250,500,1000.
Types of paper money:
-Representative paper money
Paper money that represents precious metal is known as representative paper money.
It substitutes gold and silver. Every rupee issued and brought to circulation represents equal amount of gold and silver is kept in the reserve with monetary authority. Full amount of gold and silver is kept in the reserve to issue paper notes.
-Convertible paper money
Paper money which can be fully converted into precious metals is known as convertible paper money. It does not fully represent gold and silver. Gold and silver reserve equal to the entire value of note issue is not held by the monetary authority.
-Non-convertible paper money
Paper money not convertible into gold and silver is known as non-convertible into gold and silver is known as non-convertible paper money. Nominal reserves may be held in precious metal, foreign exchange and securities. Government does not provide gold and silver for exchange of such paper money.
-Fiat money
The paper money issued on the order of the Government without any reserves is called fiat money. It is issued during emergency period. Therefore it is called emergency money. There is no limit to extend of issue.
3) Credit Money
Credit money means bank money. Credit instruments (cheques, drafts etc.) issued by banks are called credit money. The acceptance of credit money is not obligatory therefore it is called optional money. This money is exclusively used these days in transaction.

Functions of Money
In modern market economy, money is one of the most useful tools. The functions of money are expressed as in the following points:

1) Medium of exchange
Money is serving as a medium of exchange. It is the primary and unique function of money. The invention of money removed the difficulty of barter system. It provides the economic freedom to the people. People can sell or buy the products in the market. It also ensures the purchasing power to the consumers.

2) Measure of value
Money serves as a common measure of value and standard unit of account. After the invention of money, value of goods and services can be expressed in terms of money or currency. It helps to calculate the indicators like NI, per capita Income, GDP, GNP and Human Development Indicators as well.

3) Standard of deferred payment
Money serves as a standard of deferred payment. Amount of loan obtained is required to be return after a shorten period of time. Loan is borrowed in loan of money. After the expiry of time principal and interest are paid interms of money.

4) Store of value
Value cannot be stored interms of good. Storage in goods eats their value. Value stored in money remains safe and stable without destruction in value. Assets have lack of liquidity but money can be used at any time in any amount.

5) Distribution of National Income
Money is helpful in measuring the contribution of national income of various parts of a country. It is the sum of income by the contribution of all factors of production land, labour, capital, and organization in the form of rent, wage, interest and profit. All the components of national income such as GDP, GNP, Per Capita Income etc. are calculated in terms of money.

Importance of Money
Money serves as the wheel of economic system. Without money the present economic system will be disturb and our daily life will be complex. Nothing can move a head without money. Following are the importance of money:
A) Production
In production entrepreneur has to compensate all factors of production for their contribution. Rent to land, wages to laborers, interest to capital, profit to enterprises has to pay and without money we can't assess the exact compensation of factors of production.
B) Exchange or Trade
Money is common measure of exchange. It holds the quality of divisibility, portability and stability. It facilitates everyone to exchange the commodity without any fear of loss or any harm on the basis of price. This change has provided stimulation to the trade. With the help of money trading process becomes easy. Money can be given in the exchange of goods and received against the sale of goods.
C) Credit Facility
Money facilitates the environment of credit business in modern economy. It has made easier both lending and borrowing. Money is also used in standard of differed payment.
D) Socio Economic Development
Money plays a significant role in socio economic development. It is an effective means of mobilizing factors of production. Money facilitates the development of social and physical infrastructure such as road, communication, hospital etc. It also provides different fields like industry, agriculture, business etc. Modern economy is possible without use money.
E) Money in capital formation
Capital is scarce and important factor of production. Money provides mobility to capital. Capital formation is possible when there is an exact unit to measure the amount of the capital in the country. The process of capital formation in the modern economy is almost impossible without money.

Index Number in Money

Value of money changes from time to time according to variation in prices of different commodities. All prices do not change in the same extend. Some may rise or fall of remain constant. The degree of changes in price may differ from commodity to commodity.
Index number is an instrument to measure change in value of money according to change in prices. Generally index number takes the from of table.
Types of Index Number:
In general there are two types of index number:
i) Simple Index Number
The index number is constructed by giving equal importance or weighted to all commodities is called simple index number. In the simple index number, we assume base year equal to 100. According to this method, price index number is the outcome of the sum of prices for the current year divided by the sum of actual prices for the base year.
ii) Weighted Index Number
The index number constructing by giving weighted to various items as per their importance is called as weighted index number. Simple index number just gives equal importance to all commodities. Since, weighted index number are constructed on the basis of importance of commodities to the people, it measures accurate change in the value of money. In this method, different weights are assigned to different items according to their relative economic importance. There are different formulae to calculate index number by assigning different weights to different commodities.

Importance of Index Number
i) Measurement of changes in cost of living
When a price of commodity goes up, cost of living rises. If prices fall cost of living also fall.
ii) Study of fluctuation
By index number we can measured the rate of inflation and deflation.
iii) Wage policy formulation
Government changes wage policy on the basis of index number. If price level rises then government increases the wage level.
iv) Government policy formulation
Government has to formulate monetary and fiscal from time to time on the basis of price level.
v) Business forecast
Business is a matter of forecast. Prices may rise or fall in future. On the basis of past and present facts the future expectation can be made on the basis of index number.

Difficulties in constructing Index Number
i) Selection base year
One should be serious while selecting base year for index number. It should be normal year. It should not be fluctuated by any abnormal factors such as war, flood, earthquake etc. It is difficult task to select such.
ii) Problem of weight
Taking appropriate weight from the selected commodities is another difficulty of constructing index number. There should be accuracy and reliability in measuring the standard of weight commodities.
iii) Collection of data
Another difficulty of constructing index number is collection of data from the representative commodities. It is also difficult to find the reliable and authentic source of data.

Inflation, Deflation and it's cause in Economy

Inflation
Purchasing power of people expands with increase in money income supply of goods and services doesnot increase to the same extend. This brings about the economic disequilibrium, which is known as inflation.
There are various reason of inflation. Inflation occurs due to the following reasons:
1. Demand- pull inflation
If the aggregate demand for goods and services exceed the supply of these goods and services, it is called damand-pull inflation. It occurs due to the following reasons which are given below:
a) Reduction of taxation: If the government reduces the rates, it will increase purchasing power of people due to increase in disposable income of people. Consequently, the consumption expenditure and inflation occurs.
b) Miscellaneous: There are other of demand-pull inflation, such as increase in private expenditure, shortage of goods and services in the market, increasing the volume of exports, repayment of debts etc. all above mentioned factors creates the problem of excess of demand over supply of goods and services and finally inflation occurs.

2. Cost-push inflation: If the price of commodities rises due to the rise in cost of factors and raw materials, the inflation is called cost-push inflation. In cost push inflation, general price will be high and aggregate supply will be low as compared to aggregate demand for goods and services. Following are the causesof inflation;
a) Increase in wages: Sometimes price of goods and services increase rapidly due to rise in wage rate of labor. If the trade unions are strong in the country, they demand more wages to maintain real wages which increases the cost of production and inflation occurs, which is also known as wages push inflation.
b) International reasons: In the context of international trade, most of developing countries like Nepal are dependent on for raw materials, fuel energy, consumer goods etc. If the price of such goods increases in foreign country, obviously the price of such products increases in the country.


Deflation
Price decline adversely affects employment condition. It creates unemployment which brings deflation. It is also known as disinflation.
Following arethe causes of deflation:
1. Decrease in money supply: Deflation occurs due to the low supply of money in the economy. When the central bank or other financial institutions does not issue sufficient amount of money in comparison to goods and services produced in the economy, then there will be less velocity of money or circulation of money and finally deflation occurs.
2. Control of credit: One of the major functions of central bank is to control on credit creation to the commercial banks. The notice may circulate by central bank to commercial banks for increasing the ratio of cash reserved fund. It creates the deflation in the economy.
3. Increase in Tax Rate: Sometimes government may impose high direct tax rate to the people due to various reasons such as control on inflation, increase in public expenditure, fulfilling war and emergency expenses etc. The high burden of tax on people lacks the circulation of money in the economy, which creates deflation and as a result deflationary situation appears in the economy.

Money Market and Capital Market

Money Market
The financial system is the mechanism funds from surplus to deficit units through the various financial instruments include: treasury bills, corporate equities, debentures, certificate of deposits, government securities etc. The main purpose of these instruments is to collect scattered money and make funds available for investment or for payments. Some instruments are issued and traded for short-term in order to raise funds for the short period of time, usually less than one year. The market where the short term instruments such as treasury bills, certificate of deposits, money at call, inter bank transactions, commercial paper etc. are traded is known as money market. In other words money market refers to the totality of financial institutions which deal with the supply of and demand for short-term funds in the economy. The money market instruments are close substitute for money as they are highly liquid and easily marketable. The money is bought and sold in the money market. The main functions of money market are to provide short-term loans to government and the businessmen to meet their day to day requirements of the working capital, temporary funds to the speculators, and provide better opportunity for the commercial banks to utilize their funds for the short period of time. The money market provides opportunity for the banks and businessmen to utilize their extra funds which can be quickly converted into cash whenever necessary. It also enables banks to make up their unexpected needs for funds that they can obtain cheaply from the money market. London Money Market and Wall Street Money market in the USA are the two largest money markets with daily transactions of hundreds of billions of dollar every day.

Capital Market
The capital market incorporates the financial instruments with more than one year. It deals with the long term financial instruments like corporate equities, government bonds, and debentures. The long and medium-term investment funds are raised through the capital market instruments for meeting the fixed and working capital requirements of the industry or government. Main difference between the money and capital market is the maturity of the credit instruments used in the market. The former relates to the market instruments with less than one year whereas the4 later deals with the instruments used for raising medium and long-term credit from the market. Capital market plays vital role for meeting external finance need of the corporations. The corporations, instead of borrowing from the banks, can directly raise the external funds from the public and, in turn, give them share certificates which they can trade in the capital market and convert into cash. The capital market serves as a bridge to establish a link between savers and investors or surplus or deficit units of the economy. Moreover, capital market provides incentives to the savers in the form of dividends or interest which induce them to save more. In the context of Nepal, the development of modern capital market is relatively a new phenomenon. It is a small and underdeveloped by any standard. The shares of few listed companies are traded in the stock exchange, Nepal Stock Exchange Limited (NEPSE) which was established in 1993.

Central Banks work in Nepal

The central bank is an apex institution for monetary management of a country. It is the bankers' bank and economic advisor to the government. Every country has its own central bank established with the aim of promoting the financial and economic stability of the country. Unlike the commercial bank, the central bank is a non-profit making institution which acts only in the public interest and for the welfare of the country. It does not act as a rival to the other banks rather it acts as a regulator, guide, facilitator and friend of the banks and financial institutions operating in the country. Nepal Rastra Bank established in 1956 is the central bank of Nepal. The primary objectives of the NRB at the time of its establishment were to issue Nepalese currency and circulate it throughout the country maintain the exchange rate of Nepalese Currency. It has to handle various works to the country. It formulates and implements effective monetary policy in the country.

Functions of Central Bank
The different functions of Central Bank are listed briefly:
1) Banker to the government
It serves as a banker to the government. All necessary banking facilities for the government are available from central bank. It accepts deposit from the government and disburses amount required by government from time to time. Government borrows from central bank. It performs agency function for government. It buys and sells government securities, foreign securities manages internal and external public debts and handles remittances. Monetary, foreign exchange, banking, fiscal policies of the government are prepared by central bank.

2) Bankers to Banks
It provides banking services to commercial banks and all other banks. It controls and regulates banking systems. All the banks in the country have obligatory deposit of their reserve in central bank. This is called cash reserve ratio. On the basis of such reserves it controls credit creation of commercial banks. It gives loan to them as necessary. All banking and financial institutions can be established only with its prior approval.

3) Note Issue
Central bank is only authorized institution to issue notes. Gold, silver, foreign currencies and securities, domestic securities have to be held as reserves against note issue in proportion prescribed by law. NRB is required by the law to have 100% reserves. 50% of the reserves can be held in the form of gold, silver, foreign exchange, foreign securities and 50% of Nepalese coins and securities.

4) Custedian of foreign exchange and precious metals
All gold, silver and foreign exchange, reserve of a country are kept by central bank. Foreign exchange is controlled by central bank. It fixes rate of exchange and makes foreign exchange and maintains estability.

5) Mobilization of resources for development
Central bank can be mobilized resources to need financial development programs. It sales treasury bills, development bonds to mobilize resources of other banks which helps to creat employment and situation for economic development.

6) Development of Financial System
The central bank not only regulates the banks and financial institutions, but also helps to promote and facilitate the development of country's financial system. It may provide the financial technical as well as managerial support to the banks and financial institutions if they are deemed necessary for development. Some financial institutions such as NIDC, Rural Development Banks, Nepal Stock Exchange Limited, Credit Guarantee Corporation in Nepal were established with the financial support of Nepal Rastra Bank.

Public Finance

Public Finance is a study of income and expenditure or receipt and payment of government. It deals the income raised through revenue and expenditure spend on the activities of public authorities. The word public means all the members of the community and the term finance is money resources i.e. coins. But public is collective name for individual within an administrative territory and finance. On the other hand, it refers to income and expenditure. Thus, public finance in this manner can be said the science of the income and expenditure of the government.
Importance of Public Finance
There is great socio-economic significance of public finance, both in developed and developing countries. In developed countries, price-stability and full employment are the main economic goals of public finance. In developing countries, rapid economic development through capital formation and creation of infrastructure are the important goals of public finance operations. Socially equitable distribution of income, reduction of inequalities in income and wealth, helping the poor to raise their real income are some important functions of public finance operations. The importances of public finance are as follows:
a) To increase the rate of saving and investment
Most of the people spend their income on consumption. Saving is very low so the investment is also low. The government can encourage the saving and investment.
b) To secure equal distribution of income and wealth
Unequal distribution of income and wealth is the basic problem of the under developed countries. The rich are getting richer and richer while the poor are becoming poorer. So for the equal distribution of income and wealth there is need of government.
c) Implementation of planning
Under democratic planning fiscal policy plays crucial role as financial plan is as much important as physical plan and the implemention of the financial will obviously depend upon the uses of fiscal measures.
d) Infrastructure building
Public finance helps to build up well developed physical and institutional infrastructure.
e) To promote backward sectors
To promote the backward sectors there is need of government which can provide subsidy and reduces tax.

Sources of Public Borrowing
There are two major sources of public borrowing internal and external.
Internal Borrowing:
The fund which the government raises in the form of loan domestically is known as internal borrowing. Sources of internal borrowing are central bank, commercial banks, other financial and non financial institution and individual and private institution.

External Borrowing:
External borrowing refers to the loan taken from foreign government and organization such as World Bank, Asian Development Bank, World Trade Organization (WTO) etc.

Commercial Banks in economic development

Bank play very important role in economic development. The growth rate of economy largely depends on the rate of investment which, in fact depends on the level of saving. Higher saving leads to higher level of capital formation which is crucial for economic growth and development. The primary function of commercial banks is to accept deposit and provide loans. Thus, the commercial banks play major role in mobilizing saving for capital formation. Now days in Nepal commercial bank are in competition and they are launching different offer to their customer. So it's play important role in Nepal. The role of commercial banks in development is explained below:

a) Saving Promotion and Saving Mobilization
As mentioned above, the commercial banks accept deposits and provide loans of various types. The banks pay interest to the depositors against their deposits. The rate of interest to the depositors against their deposits. The rate of interest and amount of saving are directly related. This means higher the rate of interest higher will be the level of saving. Thus, banks can promote saving by offering higher interest rate to the depositors. This action of banks helps promote saving which can be utilized for investment in various of economy.
The commercial banks collect fragmented saving from the various groups of depositors and utilize them for investment. These scattered savings would not have been utilized for productive investment without banks. The individual savers deposit their money in the banks that allocate them for competing borrowers in the from of loans or directly invest in the productive sectors of the economy. Thus, banks play very import role in promoting as well as mobilizing saving.

b) Allocation of Funds
The banks help to allocate funds for optimum utilization of financial resources in the economy. As the banks use their financial experts to judge the returns or productivity from the funds they lend out, this helps in maximization of returns from the scarce financial resources. The banks collect funds from the surplus units and channel them to the deficit units of the economy. The banks serve as the bridge to eliminate the gap between demand for and supply of funds. For achieving desired profits and avoiding the risk of incurring losses, the banks try to allocate the funds so as to maximize the expected return. Thus, banks play important role in resource allocation which is an important for economic development.

c) Promotion of Trade, Industry and Employment
The banks facilitate the trade and industry by providing long as well as short-term loans and supplying various kinds of banking services and products such as L/C operations, foreign exchange facilities, payments, settlement etc. The banks not only accept deposits and provide loans but also create credit while extending loans. In the modern banking, most of the transactions are done through banks. Banks serve as the major agent of international trade while making imports or exports of goods and services. Similarly, the banks help to promote industries by providing financial resources needed for capital investment and monitoring investment projects so as to minimize the risk. The banks also make direct investment in the productive industries by accumulating scattered and idle resources in the form of deposits. This helps to create more employment in the economy. These all actions of banks help to promote domestic as well as international trade and industry which are essential for economic development.

d) Transfer of Money
In the modern globalized world, citizens of a country are not limited to work within their own territory. They move from one country to another in search of better employment opportunities. While working abroad they send their earnings to the family members or relatives in their own countries through banks. Thus, banks help to transfer remittance which is one of the main sources of income for the developing countries like Nepal. Transferring remittance through banking channel not only increases recipients and banks income and country's foreign currency reserve but also helps to construct macroeconomic indicators based on the real statistical records from banks through which remittances are transferred. The increasing volume of remittance has become one of the major sources of investments for economic development in underdeveloped countries.

Evolution of Marketing

Marketing is a highly dynamic field of study. The field of marketing is constantly emerging and developing. The meaning and scope of marketing has changed over time. The role of marketing in business and society also changes with socio economic development. The term 'marketing' has been treated differently at different periods of time.
The first definition of marketing was given by the American Marketing Association (AMA) in 1960. "Marketing is the performance of business activities that directs flows of goods and services from producer to consumer or user".

Evolution of Marketing
The evolution of marketing is associated with the development of human society. The development in the field of science and technology also contributed to the development of marketing. Evolution of marketing can be studied in context to human development.
Marketing did not come suddenly on this present stage. It has a long evolution history which was gradually developed with human civilization, trade and business.
Phase 1
When people started to live permanently at village and start farming at that time farmer used to produce surplus food they used to exchange that surplus food with another needs like agriculture tools, clothes etc. with their neighbors in temporary market called haat bazaar. So marketing was born on barter system, where people exchange goods.

Phase 2
In this phase temporary market developed as a permanent market, where people use together to exchange their goods and services, more transaction take place at place of barter system. People used to sell their goods and services at permanent market. But the trade is limited within local market. People based and annual based transportation is used to distribute the products.

Phase 3
In this stage the area of market is not limited within national boarder, the area of market is expand from the establishment of trades routes on land and sea. Various means of transportation has been developed. In this age marketing is limited to transportation and profitable exchange.

Phase 4
Introduction of machine help in mass production of goods hand made products has been replaced by machine made products. New means of transportations, railways and steamer has been introduce in this stage. Mass production was supported by mass distribution. Distribution channels have been radically changed. Producer hired agents like wholesaler, retailer to contact buyers. Competitors forced manufacturers to adopt advertising and other promotional activities. Product warranty and guarantee has been introduced.

Phase 5
In this stage various pressure groups force marketers to take national and international certificate for their products. Many consumers group were formed for enactment of several consumer protection laws. Marketers in this stage declear the ingredients used in the product and expose truth in marketing.

Phase 6
Now a day's environmental protection has become a major issue internationally. Several enactments of laws have been introduced against the environmental pollution. So marketer has to develop ecologically safer product, recyclable packaging for better pollution control.

Phase 7
As we enter the twenty first century rapidly changing computer, information, communication and transportation technologies had brought new challenges and opportunity in marketing. Developments on technologies are making the world smaller place and we are connecting in new a different ways.

Marketer can use internet to know the consumer needs and preferences and can collect valuable information within a minute. Likewise customer can also place an order and get delivery of product through electronic commerce. This has given marketing companies an opportunity to under take direct marketing.

Importance of Marketing

In the first decade of twenty first century, dramatic changes are occurring in the marketing arena, the major marketing development has various importances towards consumer, firm and society which can be sum up as follows:

Importance of Marketing towards Customer
a) Provide satisfaction
The main goal of marketing is to deliver value and satisfaction to consumers. Modern marketing is mainly concerned with understanding consumers needs, wants and preferences and delivery appropriate products and services that delight consumers.
b) Freedom of choice
Consumers can exercise a very wide freedom of choice through the marketing activities. Marketing offers a variety of goods and services at varying prices among which consumers can elect those that match their needs. Marketing also offers a very wide choice of retail outlets ranging from the neighborhood stores to large department stores from which consumers can fulfill their needs.
c) Information
Modern marketing educate consumers in various ways. It informs consumers about the product availability thereby reducing consumer's search time. It also provides information on price, quality and the appropriate use of the products.
d) Increase living standard
Modern marketing provides variety of goods and services at affordable price which helps customer to improve life style and living standard.

Importance of Marketing towards Firm
a) Provide market information
Based on marketing information system business organization can collect various important information from market. So marketing provides important information regarding.
What to produce?
When to produce?
At what quantity to produce?
How much price should be fixed? And so on.
b) Mass distribution
Mass distribution can be achive only through marketing. Marketing provides information about distribution. It is the art of selling right product at right place to right person at right time through proper promotion and proper distribution channel.
c) Revenue generation
Marketing is only departments which generate profit to the organization by providing want satisfying product to customer.
d) Increase goodwill's
Primary objective of marketing is to satisfy customer of customer are satisfied they make repeat purchase of goods and services and became life time customer. So success of business depends upon customer satisfaction which increases the goodwill of company.

Importance of Marketing towards Society
a) Employment generation
Marketing provides a large number of employment opportunities which helps to reduce unemployment rate in society.
b) Poverty reduction
The major sector of economy like agriculture and industry development can be possible by the help of marketing. So marketing eliminate poverty by increasing investment, employment, production, income and saving through proper development of agriculture and industry.
c) Creation of utility
Marketing adds value to product or service through the creation of place, time, quantity and images utilities.
d) Utilization of resources
Marketing helps to use optimum utilization of physical, financial, natural and human resources for development of nations.

Characterstics of Nepalese Market

The characterstics of market is determined by the level of development of country. As a developing country Neplease market has its own characterstics which can explain as follows:

a) Rural Market
Around 80% of total population lived in rural area. Due to lack of transport facilities supply of basic needs in rural market is limited. Consumers have to walk a long distance to buy goods and services. There is barter system exists on Himalayan region and ''Haat Bazaar'' on terai region. So Neplease market is of rural nature.

b) Seller's market to buyer's market
A large part of Neplease market is control by sellers. Nowadays some producers are giving priority to consumer's needs and wants. This indicates that Nepalese market is slowly moving towards consumer market.

c) Lack of consumer awarness
Majority of neplease people have low awarness about the product brand, quality and most of them are price sensitive. Customers prefer to buy low priced product. There is lack of legal provision rules and regulation relating to quality of products. Consumer protection act is not implemented effectively.

d) Credit transactions
Buying and selling goods and services on credit is one of the main characteristics of Neplease market. Producer provides credit facility to wholesaler or dealer similary credit facility has to be given to retailer. When payment cycle became long it adversely effect the smooth operation of sales and distribution activities.

e) Weak marketing information
Most of the Neplease business firm donot use marketing information system together, sort, analyze the various important information from market.

f) Poor promotional efforts
Most of the organizations push sales by providing incentives to channel members so promotional activities are so poor at Neplease market. They emphasis on credit transactions inorder to increase sales volume on market very few organization use advertisement as effective promotional tool.

g) Technical weakness
There is lack of technical manpower in Neplease market most of the promotional tools are designed at India or by Indian experts who donot have knowledge about Neplease culture, language and social system.

Classification of Market

The word market was derived from Latin word "Marcatus" which means trading or place of transactions. Market was classified in four categories they are elaborate below:
i) Area Classification
Market can be classified on the basis of geographical area covered by organization such as:
a) Domestic Market
The area of the domestic market is defined by the national boundary. Domestic market may occupy different size of the market area. It may further be classified into the local market town market, district market and national market. If buying and selling goods and services are limited within national boundaries this market is called domestic market. It can further classified as rural market and urban market.
b) International Market
If goods and services are sold across national boundary that market is called international market. International market can also classified on export market which is concentrated on certain geographical area i.e. Europe market or global market where there is no national boundary.

ii) Volume Classification
On the basis of volume market can be classified as:
a) Wholesale Market
If a large number of finished products are purchased from producer and sold to retailer such market is known as wholesale market.
b) Retail Market
If products are sold directly to final consumer at small quantity that market is known as retail market.

iii) Competition Classification
On the basis of competition market can be classified into:
a) Monopoly Market
If number of producer is one no competition exist on market such market is known as monopoly market. Single seller control price, quantity and delivery of product at market.
b) Monopsony Market
There is single buyer of product and buyers control the price, quality of product and terms of sales in market.
c) Oligopoly Market
If the number of sellers is few and number of buyers is manby such market is called oligopoly market. In this market supplier often set price through syndicate.
d) Imperfect Competition
There are large numbers of buyers and sellers in market. Buyers can choose from wide range of product at different price, quality etc. In practice most of the product are bought and sold at imperfect market.

iv) Product and Customer Classification
On the basis of nature of product market can be classified as:
a) Product market
Market can be classified under the product sold in market such as vegetable market, labour market, share market etc.
b) Customer Market
According to customer market can also classified such as farmers market, government market, institutional market etc.

Buying and Selling in Marketing

Buying
Buying of a goods and services is a first and most important function of marketing process. Producers, intermediaries, wholesaler and retailers. Producers buy raw materials semi finished goods to produce final product. Middlemen buy goods to resell, consumer buy goods for satisfaction.

Elements of Buying:
Buying includes five major elements which can describe below:
a) Demand Estimation
First of all every buyer must estimate demand of product correctly. The buying activity is planned on the basis of anticipated demand in market that purpose demand forcaste is made on the basis of opinion of salesperson, channel members and past trends etc.

b) Identification of sources of supply
After estimating the demand the buyers has to identity and locate all alternative sources of supply of the product. The buyers can search for potential suppliers from various sources and buyers can select best of one supplier among them on the basis of repatation, past experience financial and strength, delivery capability etc. of supplier.

c) Assembling
In this step buyer prepare detail description of require product. Finance department provides budget like wise product department provides technical and specification, quality and quantity of product.

d) Negotiation terms and condition
In this stage the buyer has to negotiate the price and other terms and conditions of purchase. Basically the negotiation has to be done for regarding the matters like price, discount, and delivery date and payment methods.

e) Purchase
Finally, the buyer and seller agree on the term and condition of sale and enter into a contract. In this stage the ownership of product is taken by buyer and arrangement for physical delivery of product is made.

Methods of Buying
There are various methods of buying. Buyer can adopt a particular method among them. The methods of buying are as follow:
i) Conservative buying
Here buyer uses to purchase small quantity of goods to meet their daily needs. This method is also known as current need buying, economical buying, small order buying. Conservative buying is suitable when the price of the product is fluctuating or decreasing.

ii) Buying by tender
In this method buyer buy goods and services by tender. They called tender from various suppliers and select best among them. Most of the government offices use this method of buying.

iii) Contract buying
Buyer and supplier make an agreement by defining term and condition and follow the term and condition and follow the term and condition mention on contract. Buyer get regular supply of goods at certain price for fixed duration as mentioned in contract.

iv) Concentrated buying
Under this method buyers buy necessary goods from one or few seller from certain area. Concentrated buying build up special relationship with supplier so they can get higher discount avoid searching cost.

v) Buying by samples
Sellers sell the samples and price list a product to buyers. If the buyer is satisfied with the product and price list buyer place and order.

Selling
Selling is one of the most important merchandising functions of marketing than transfer the ownership of goods and services from seller to buyer in terms of money.
Different elements of buying are describe briefly:
a) Product Planning and Development
It is mainly concerned with customer needs and desires. Therefore product and service should be developed according to customer needs.

b) Identification of Customers
In this step the seller has to identify the potential customers from various source mainly the seller identify the customer who have the current need or future need of the product.

c) Demand Creation
After identifying potential buyers called customer seller can creat demand by using various promotional tools of marketing like personal selling, advertising, sales promotion, publicity and public relation.

d) Negotiation
It is discussion between buyer and seller to finalize the term and condition of sale. They negotiation about the product price, quantity, quality, delivery date, mode of payment, provision of discount and mode of transport.

e) Transfer of Ownership
This is the final step by which the ownership of product will transfer from seller to buyer.

Buying motives of Consumer

Buying motives are the reasons or forces which motivates the customer to buy a product or service. Identifying buying motives is a difficult task for sales person because many motives are hidden.
Sometimes customers do not express his or her motives behind buying a product or services. There are various factors which inspire or motivate customer to buy a product or service profit, fear, vanity, pride, fashion, romance, love, health, comfort, convenience, curiosity, safety, habit and many others.
Different buying motives of consumer
a) Rational Motives
The customer buy goods and services for certain purpose and they can explain the reason of buying such buying is called rational motive. So rational motive is logical motive which are supported by reasons. Following are the rational motive.
-Profit or economy
-Health
-Safety
-Utility
-Comfort and Convenience

b) Emotional Buying Motives
Emotional buying motive depends upon the emotion, feeling and attitude of customer. This buying motive may differ from person to person. This include following things:
-Fear
-Love and affection
-Curiosity
-Fashion

c) Prestige Motive
This motive is related with the want of customer for protection of self image and promotion of their ego under this vanity and pride are buying motives of customer. This include following things:
-Vanity
-Pride

d) Patronage Motive
This motive describe about specific motives of customer regarding brand loyality and store loyality. It describe why customer buy certain brands goods and reject others and why customer buy necessary goods and services from particular store. This include following things:
-Brand loyality
-Store loyality

Standirazation and Grading in Product

Standard is a description of a product established by authority. It is declaration by of the acceptable level of quality, features, sizes and shapes of the product. So standardization involves at first setting a standards and making uniformity on production as for standard. In Nepal standard and methodology department provide NS marks and International Organization for standardization provide ISO mark for product and service. If they meet the international standard.

Importance of Standardization
It is an important marketing function which helps the marketing process in buying and selling of goods. The importance of standardization is given below:
a) Buying and selling convenience
A buyer can easily purchase the standardized product without detail specification. Similarly the seller can sell standardized product with higher confident because the producer has already conform the quality level of product.

b) High product image
There is a better image of standardized product than non standardize product. Customers are ready to pay higher prices for the standardize product.

c) High safety level
Standardized product provides instruction for how to use product. So it is safer than none standardized product.

d) Fair price
The manufacturer fixes the price of standardized products. The buyer and the seller do not have to haggle over the price of the product.

e) Quality improvement
The producers of standardized product always focus on quality improvement as a result better quality is maintained in standardized product.

Grading
Grading is a process of dividing products on the basis of the size, shape, quality, colour, weight etc. It is widely used on agriculture products and raw materials. It also helps to determine the price of products.
Grading is widely followed in marketing of farm products and raw materials. Grading determines the value of the product as the best grade commands the highest price. Grading of products can be manual as well as mechanical. Looking, felling, smelling and tasting are methods of manual grading. Mechanical grading is used for determining the weight of the product. Electronic devices are used for grading of milk, cream etc.

Types of Customer in Market

I n our world there are different types of customer are found they have different nature, behavior, activities according to their behavior we listed different types of customer briefly.

a) Implusive Customer
Customer who takes quick decision on emotion is known as implusive customer. They used to purchase goods and service on emotion rather than requirement most of they are impressed by the behavior of salesman.

b) Nervous Customer
Customer who have lack of confidence on decision making and demonstrate nervousness on buying are called nervous customer. To win confidence salesman should provide proper suggestion and detail description as well as relative advantages of product.

c) Silent Customer
Customers who are silent in nature and donot express or demonstrate their feeling on buying are known as silent customer. They donot share their opinion so salesman should demonstrate maximum number of product to win confidence of customer.

d) Talkative Customer
Customer who are very talkative on buying process are known as talkative customer such customer do not hear others. So salesman should behave in polite manner to handle such customer.

e) Argumentative Customer
These customers are interested in making argument with salesman. They introduced themselves more knowledge able and superior than salesman. So salesperson should keep patience and provide warranty of product to handle such customer.

f) Delibrate Customer
Customers who are practical and matured in decision making are known as deliberate customer. They buy goods and services after detail study of product and services from different angles. They donot buy substitute product. The salesman should demonstrate actual product and detail information to motivate such customer.

g) Women Customer
The customers who have sharper sense and kinner taste than men and attracted with colourful and fashionable items are known as women customer. They want high quality product at lower price and have good bargaining power. So to motivate such customer salesman should respect and provide price discount on buying.

h) Price minded Customer
Customer who is price sensitive rather than quality of product is known as price minded customers. They are attracted towards low priced product and tried to reduce price as much as possible.

i) Undecided Customer
Customer who donot decide to purchase goods and services at night time and always postpone their buying decision for next visit is known as undecided customer. Salesman should encourage them by explaining the quality of product and show fear about changing price, latest design, fashion etc. So they can take decision quickly.

j) Truthful Customer
These type of customer listen and support the explanation of salesman but donot express any view on buying such customer are known as truthful customer. Sometimes they donot buy goods and services and do not express their view so, it is very difficult to handle them. Salesman should try to fund out the causes behind it and try to convience and provides all kinds of incentives to motivate them.

k) Ill mannered Customer
This customer is rough, crude and negative in nature. They speak roughly relating to price, quality and services.

These type of customer are mainly found in the country Nepal and as well as the rest part of the world also.

Branding in Product

A brand is a name, term, sign, symbol or design or combination of these that identify the maker or seller of product or service. Consumer view brand as a important part of product. So branding means to give specific name, symbol, term or design to product. Inorder to popularize and help customer to identify.

Differences of Brand name and Brand mark
Any word, sign, symbol, design given to product to identify the product in market is known as brand mark. Example: green bottles of 7up

If the same sign is legally registered in concern government office is called trade mark. So all trade marks are brand but all brand are not trademark. Example: coca-cola

Importance of Branding
Branding is important not only from the marketers. It also provides various services to buyers and the society.
a) Product identification
Buyers can identify a product or it's manufacturer only when the product is branded. Branding helps buyers to choice goods in the market. Buyers have brand concepts and images that guide them in choice products.

b) Legal protection
Branding plays vital role in legal protection. Marketers use brand value, brand image and brand personality to protect their products against competitor's products. legal protection helps the marketer to avoid price comparisons by buyers

c) Promotion
Brands are the focus of all promotional activities. Advertising, personal selling, sales promotion and publicity are built around the brand name. Buyer's choice of product is mostly made on the basis of brand name.

d) Promotion of social and cultural events
Various brand used to sponsor social and cultural event such as health camps, conference and seminars, sports events such activities not only promote products but also promote social and cultural events on society.

e) Protection of environment
Manufacture of branded product are more conscious about environmental issue, they used to produce environmental friendly product, recyclable packaging.

f) Build corporate image
Image and personality are developed and established in market inorder to appeal a particular group of consumers. These image and personality are built around the brand names and brand marks. These brand images and personalities influence buyer's choice of product.

Reasons for not Branding
a) Difficult to differentiate
Those product which are difficult to differentiate in market are not branded for example minerals, stones etc.

b) Perishable products
Perishable products cannot store for long time. It must be consumed as soon as possible so manufactures of perishable product do not give specific brand name to their product.

c) Product of low quality
If the market do not have full control on quality of the product at that time they prefer to sold the product without specified brand name.

Types of brand
a) Manufacture's brand
This brand is owned and controlled by manufacture. It is promoted by manufactured nationally and internationally. Surya tobacco company, Bata etc. are examples of manufacture's brand.

b) National brand
If marketer supplied a product within single name or brand with national geographical area is known as national brand.

c) Family brand
If marketers give single brand name to different products produced by company is known as family brand. Hulas Company is family brand.

Qualities of a good brand name
a) simple
b) Reflecting product attributes
c) Legally prosecutable
d) Product line extension
e) Possibility to use in foreign market

Packaging

Packaging is the activity of designing packaging involves or wrapper for the product. Packaging involves providing space for the product when they moves from one place to another places and it also communicate with buyer promote their sales and make them convenient for consumer to use.

Levels of Packaging
-Primary package
-Secondary package
-Shipping package

Functions of Packaging
a) Protection
It is important function of packaging. It protects from leakage, breakage.

b) Identification
Packaging also plays communicative role with buyers. It provides various information regarding products such as name of manufacture, place and date of manufacture mode and serial number of the product etc. Which make the identification of product.

c) Communication
Packaging provides various important information to buyers. It provides information regarding price, quality, product attributes the ingredients used in the product use instruction etc.

d) Promotion
The other important selling function of packaging is to promote sales of product. Attractive packaging draws attentions of customer stimulates their interest towards product to buy.

e) Product differentiation
Packaging is used for differentiating product in market. It helps the development of brand personality and image.