Write down the financial structure of Nepal and of Rastra Bank. What are the advantages of financial literacy? How does financial inclusion help to financial literacy? Explain

Financial Structure of Nepal

Banking-            Insurance-          Capital market- Non-Banking Institutions-              Cooperative

A Class                Life Insurance    Stock Exchange      Employee provided fund     Saving & credit cooperative ins.

B Class                 Re-Insurance    Listed company      Citizen Investment fund      Licensed S&C institution

C Class                 Non-life insurance Merchant Banker    Social security fund         Non-cooperative inst.

D Class                 Mutual fund                                               budget, cash flow, saving etc.

            It built sense of responsibility during the time of financial crisis such as depression, recession.

            It helps to build or form retirement plan

            It helps us to detect or identify financial errors and frauds and prevent it;

            It enhances person’s living standard

Financial Inclusion

Financial inclusion refers to the availability and equality of opportunities to access financial service. It typically established the financial habit on people who access such kind of services, and we see the high degree of financial literacy that makes them capable to make smart financial decision and conduct financial transactions to achieve or obtained the financial goals and financial stability.

 Objectives of Nepal Rastra Bank

According to Nepal Rastra Bank Act, 2058 chapter 2, section 4, sub-section(1) the objectives of the bank shall be as Follows;

1. a) To formulate necessary monetary and foreign exchange policies in order to maintain the stability of price and balance of payment for economic stability and sustainable development of economy, and manage it.
2. b) To increase the access of the financial service and increase the public confidence towards the banking and financial system by maintaining stability of the banking and financial sectors,
3. c) To develop a secure, healthy and efficient system of payment;

(2) The Bank shall, without any prejudice to the objectives referred to in Sub-section (1), extend cooperation in the implementation of the economic policies of Government of Nepal.

Functions, Duties, and Power of the Bank

According to Nepal Rastra Bank Act, 2058, chapter 2, section 5(1) the functions, duties and power of the bank in order to achieve the objectives referred to in section 4, are as follows;

1. a) To issue bank notes and coins;
2. b) To formulate necessary monetary policies in order to maintain price stability and to implement or cause to implement them;
3. c) To formulate foreign exchange policies and to implement or cause to implement them;
4. d) To determine the system of foreign exchange rate;
5. e) To manage and operate foreign exchange reserve;
6. f) To issue license to BFIs to carry on banking and financial business and to regulate, inspect, supervise and monitor such transactions;
7. g) To act as a banker, advisor and financial agent of Government of Nepal;
8. h) To act as the banker of commercial banks and financial institutions and to function as the lender of the last resort;
9. i) To establish and promote the system of payment, clearing and settlement and to regulate these activities;
10. j) To operate open market transaction through necessary instruments for liquidity management,
11. k) To implement or cause to implement any other necessary functions which the Bank has to carry out in order to achieve the objectives of the Bank under this Act;

 Prior right of the Bank according to section 6;

(1) For the purpose of recovering any loan or any other type of claim of the Bank against any borrower, the Bank shall have prior right of security over cash deposited in an account in the name of such borrower at any BFIs

(2) The Bank shall recover its loan by taking into its custody the cash or movable or immovable property having its prior right and selling such property as prescribed.

Functions that shouldn’t carryout by the bank according to section 7(1) except otherwise provided in this Act, the Bank shall not carry out the following functions: –

(a) Providing any loan, accepting any type of deposit or making any type of financial gift;

(b) Purchasing shares of any BFIs, public corporation or a company or acquiring any type of proprietary right in any financial, commercial, agricultural, industrial or other institution;

(c) Carrying out any type of trade;

(d) Acquiring right over movable and immovable property by way of purchase, lease or in any manner;