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.