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.