Functions, Duties and Rights of Commercial Banks in Nepal

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functions of commercial banks

What is a Commercial Bank?

Commercial Banks are financial institutions that provide services like accepting deposit from the general public, making business loans, and offering basic investment products.

Commercial Banks acts as a bridge between those who have surplus money and those who need it. Receiving deposits and advancing loans are the main functions of commercial banks. Commercial banks are established with the sole purpose of making a profit.

Functions of the commercial banks

1. Accepting Deposit

2. Advancing Loans

3. Working as an agency function

4. Credit Creation

5. Issue of credit instruments

Functions, Duties, and Rights of the Commercial Banks According to BAFIA

(BAFIA ले तोके अनुसार वाणिज्य बैंकहरुको काम, कर्तव्य र अधिकारहरु)

A Class “A” licensed institution can carry out the following financial transactions subject to BAFIA, MOA, and AOA.

  • Accepting deposit with or without interest and repaying the deposit through various financial instruments.
  • Provide intermediary services and transfer funds through the various electronic medium.
  • Disbursement of credit (hire-purchasing, leasing, overdraft, and housing).
  • Disbursement of credit on a guarantee of foreign B&FIs.
  • Disbursement loans from the amount received from the Government of Nepal or other native or foreign agency for project promotion.
  • Issuing shares, debenture, bond and so on to meet the capital fund subject to the limitations, conditions or directives issued by the Nepa Rastra Bank.
  • Foreign currency transactions subject to the prevailing laws.
  • Carrying out the government transactions subject to the limits, terms and conditions or directives or NRB.
  • Purchasing, selling or accepting bonds issued by NRB and Government of Nepal.
  • Remitting or transmitting funds to different places within or outside Nepal and receive remittance from abroad to make payment thereof.
  • Buying and selling of gold and silver bullions.
  • Prudently managing of selling its own assets of all type to come under its ownership according to this and prevailing laws.
  • Carry out the other functions as prescribed by Nepal Rastra Bank.