According to bank and financial institution act, 2073-chapter 5 section 37, banks and financial institutions are categorized into 4 classes on the basis of minimum paid up capital, transactions to be operated and working areas of the banks and financial institutions. On the basis of following requirement, the Rastra bank may issue license to such banks and financial institutions accordingly but this act has not categorized infrastructure development bank;
Reasons to categorized banks and financial institutions
To divide banking and financial services on the basis of nature of transactions of the banks and financial institutions;
Categorizing banks and financial institutions ease monitor, supervise, inspect and regulated banking and financial transactions of the banks and financial institutions;
To formulate necessary legal policies and requirement for the establishment, operation and management of the banks and financial institutions;
To facilitate the identification of the financial institution to promote in higher class, if the financial institution has fulfilled the necessary requirements;
To provides necessary incentives to banks and financial institutions that helps Rastra bank to achieve its objectives;
To promote the sound and healthy competition between the banks and financial institutions;
To make banks and financial institution identical for the customers to conduct short term and long-term financial transactions;
To collect information of the various nature of customers to create and carry appropriate plans and policies related to banking and financial transactions;
To increase the public confidence towards the banks and financial institutions;
Bank and financial institution act, 2073 has classified the banks and financial institutions to make available deferent nature of financial services to different nature of its customers all over the country.
