Commercial bank is ‘A’ class licensed financial institution incorporated to carry out banking and financial transactions as mentioned on section 49(1) of Bank and Financial Institution Act, 2073. Commercial bank plays crucial role on the economic development of Nepal which is as follows;
Role of Commercial Banks on the Economic Development of Nepal
Commercial bank collects ideal money as deposits and invest those deposits on the productive sectors what causes the capital formation.
Encourage new and small entrepreneurs by providing required amount of loan at reasonable rate.
Similarly, it encourages private sectors in an economy to influence economic activities by charging low interest rate on loan and advances.
It monetizes money since it increases the banking habit or financial literacy of people by expanding their branches in rural areas of the Nepal.
It also helps to implement economic policies such as fiscal policy and monetary policy for the sustainable economic growth.
It offers attractive interest rate on deposit and loan to incase the investment and saving habits.
It promotes national and international trade with the help of non-funded transactions such as Bank Guarantee, Letter of Credit Etc.
It has been providing suitable credit facilities for the development of the agriculture sectors that has greatly helped in raising agriculture productivity and income of the farmers.
It plays an important role in balanced development of different regions of the Nepal by transferring surplus capital from the developed regions to less developed regions.
It promotes export of the country by providing information about general trade and economic condition of the Nepal to its customers.
It acts as a bridge between organized and unorganized money market for smooth conduction of financial transactions.
It regulates and diversifies the flow of cash into the various productive sectors for the growth of such sectors that may contribute on the economic development of Nepal.
It acts as a catalyst in bringing social changes through its sectorial priorities.
It provides tremendous support to the Government of Nepal to create employment opportunities and infrastructural development in the different regions of the Nepal.
Commercial Banks have been playing crucial role in promoting economic development of Nepal. It performs various functions in an economy that directly affect the economic development of Nepal; these institutions are even considered as a driver of an economy. That why such institutions are strictly controlled and directed by the Central bank to avoid unexpected accidents.
