Management Notes

Reference Notes for Management

History of Central Bank in Nepal – Nepal Rastra Bank | Financial Management

History of Central Bank in Nepal | Nepal Rastra Bank | NRB |  Financial Management

It has been a gradual, continuous process of growth for the central bank in Nepal. Nepal Rastra Bank was established as the national central bank in 1956 with the objective of supervising, promoting, and directing the activities of commercial banking. Nepal Rastra bank is a non-profit organization that is wholly owned by the government. As the country’s central bank, it has the exclusive right to issue currency notes and coins and is responsible for managing foreign exchange reserves. Since 1959, Nepal Rastra bank has issued currency.


In Nepal, the central bank has a long history of being an autonomous corporate body with perpetual succession. According to the Bank’s Act, the Governor, after consulting with the Government of Nepal, may direct the Bank to take any action in the national interest. Unlike any other organization, the Bank plays an essential role in the economy of the country. As the highest monetary authority, NRB plays a large role in economic development.


In general, the Bank’s activities are aimed at promoting the financial and economic development of the country. Therefore, Nepal Rastra Bank works closely with the Government of Nepal in order to ensure that its monetary and financial policies do not contradict its plans and programs. In response to the dynamic and vibrant economic situation in Nepal, the Nepal Rastra Bank was reformed through the New Nepal Rastra Bank Act of 2002, which has outlined monetary and foreign exchange policies, as well as continued reforms in the financial sector.


The challenging tasks for the Nepal Rastra Bank are to redirect monetary policies and re-engineer the financial system through improvement in financial sector legislative framework passing new acts like Nepal Rastra Bank(First Amendment) Act,2006; Bank and Financial Institution Act,2006; Insolvency Act, 2006; Company Act, 2006; Secured Transaction Act, 2006; Money Laundering Control and Deposit and Credit Guarantee Acts, 2006, etc with the strategic goal of strengthening the financial sector to ensure health financial growth and economic stability.


In the context of growing financial globalization, strong policy directives, leadership, commitment, and adequate institutionalization of NRB are key factors to promote a conducive and competitive financial environment. There were 23 employees at Nepal Rastra Bank in the beginning, including the governor and the Chief Accountant. The Office of the Governor was one of many departments that operated during the initial period, along with the Banking office, the Accounts department, the Currency Department, and the Research Department. At a regional and central level, different departments and offices were established over time. During Bank’s early years of operation, there was an acute shortage of trained labor. Therefore, the bank arranged for training classes to be conducted under the supervision of senior officers.


Likewise, some officers were sent abroad for training on various subjects, including investment and accounts, note issuance and banking, public debt management, agricultural credit, economic planning, national accounting, statistics, and other relevant subjects. During its first years of operation, the Bank was committed to abolishing the dual currency system, maintaining the exchange rate stability of the Nepalese currency and controlling the circulation of Nepalese currency throughout the country.


In order to achieve this, the bank opened offices and currency exchange counters in a number of economically active areas in the Terai region, including Biratnagar, Birguni, Siddhartha Nagar and Nepalgunj. These offices were also expanded in hilly areas like Illam, Bhojpur, and Dhankuta, Pokhara, Palpa Baitadi and Doti. In order to provide banking services to the government of Nepal and to a limited extent to the general public, the Bank has gradually increased the number of its branches in the country. As the number of offices and activities of the Bank’s Central Office grew, staff were recruited to staff them.

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