Types of bank

A single institution can’t fulfill all the services demanded by the customers. So, different types of banks emerged in the banking industry concentrating on a special sector. On the basis of their specialized function bank can be classified as under,

Commercial Bank :

A commercial bank is a financial institution which collects saving from many persons and institutions and provides credit or loan facility to different industrial and commercial business. Commercial banking business consists of changing cash into bank deposit and bank deposit into cash, transferring bank deposit form one person or institution to other, giving bank deposit in exchange for cheques, bills of exchange, government securities etc.

                      

Nepal bank limited established in 1994 BS is the first commercial bank in Nepal. Commercial banks perform various functions. Among them accepting various types of deposit is the main function of commercial banks.

In brief commercials bank performs:

·        Accepting various types of deposits,

·        Lending money in various production sectors,

·        Letter of credit i.e. credit creation,

·        Issue of Guarantee,

·        Money remittance,

·        Bills acceptance and payment others

     Central Bank:      

        

Central bank is the bank of government of any country. It acts as a guardian of all banking institution. It is set up to make sound monetary policy. Its focus is on monetary stability. It controls banking sector by regulation, persuasion and market operation.

Bank of England-1964 is the first central bank of the world. Nepal Rastra Bank is the first central bank of Nepal established in 2031 B.S. In brief, central bank performs:-

·        Note issue.

·        Regulation, control and supervision of banking sectors.

·        Acting as a Government bank.

·        Clearing house function.

·        Credit control function.

·        Lender to the last resort.

·        Publication of monetary and financial information.

      Development Bank:

Development bank on its meaning is established for development of certain sector they collects funds from share capital debentures , long term deposits  refinance from central bank. Generally development bank aims to develop – (i) Infra structure development of country. (ii) Agricultural development of country. NIDC (Nepal industrial development corporation 2018 B.S.) and ADB (Agriculture Development Bank 2024 B.S.) are development banks of Nepal.

        Saving Bank:

Saving bank objects to mobilized the small scattered savings and promote saving of small groups to save something out of their income. So, saving bank doesn’t collect / accept huge amount from business houses. Higher interest rates are offered on such savings. In Nepal Hulak Bachat Bank (post saving bank) was set up in 2019 B.S. to encourage the thrift.

    EXIM Bank (Export & Import Bank) :

These banks deal in foreign exchange and specialize foreign trade and supply the necessary foreign exchange requires for settlement of transaction between traders. They open letter of credits, Guarantees in foreign currencies. They make finance for export and import transaction. Commercial banks perform such function in Nepal.

F)     Other Banks:

a.         Co-operative bank:-

Those banks that operate on the principle of cooperation are co-operative bank. They collect small deposit and mobilize small savings. They also provide short and medium term loan.

b.         Housing Bank:-

House bank collects deposit and finance in the development of houses. They purchase and sell securities in the market also.

c.          Merchant Bank:-

Merchant bank’s main source of capital are the time deposit and by the issue of securities. Nepal Sri Lanka merchant bank is an example of merchant bank.