NEPAL RASTRA BANK, ITS RESTRICTED FUNCTIONS AND PRIVILEGES ENJOYED

INTRODUCTION:

Central bank is the bank that is authorized to manage the whole economic system and helps other banks to conduct harmonious financial environments for the people through proper control. It is apex bank of the country.

According to Shaw:

"The central bank is a bank which controls credit"


According to Dr. D. Kock :

"A bank which constitutes the apex of the monetary and banking structure of its country is called central bank."


Central banks maintains the cash reserves of the commercial banks, issues notes, settles disputes within banks, controls credit and keeps advising to the government and other banks to maintain the harmony in financial environment. Central banks in all the countries are fully owned by the governments.

In the context of Nepal, the central bank of Nepal is Nepal Rastra Bank. This bank was established in 1956 A.D under the Nepal Rastra Bank Act 1955. This bank is also called 'Bank of the Bank' or 'Lender of last resortr', 'Regulator of the Bank' or 'Father of the Bank' or 'Apex of the Bank' or ' Bankers Bank'.

The main vision of the bank is to become a modern, dynamic, credible and effective Central Bank. In order to attain its vision, the bank follows a specific mission as to maintain macro-economic stability through sound and effective monetary, foreign exchange and financial sector policies.

The Nepal Rastra Bank is an autonomous corporate body with perpetual succession. It has a separate seal. The Bank may sue and be sued in its name. The Bank may acquire, utilize, retain, sell and dispose of or manage movable and immovable property as per the powers given under the Nepal Rastra Bank Act 2002.

The Central office of the Bank is located at Kathmandu. The Bank can open branch, sub-branch and other offices at any place within and outside Nepal . Similarly, the bank can appoint agents or representatives as per its requirement.

The first governor of the bank was Mr. Himalaya Shumsher Jang Bahadhur Rana. The tenure of the his office period was from April 26, 1956 – February 7, 1961.

The current governor of the central bank of Nepal is Dr. Chiranjibi Nepal. He is the sixteenth governor of Nepal Rastra Bank. The tenure of office handled by him was commenced from March 19, 2015.

Due to the current change in new federal structure of the government, there was a sound need to meet different emerging issues.

Therefore, as per the powers given by the new constitution of Nepal, 2015 in its article number 296 (1) the amendment to Nepal Rastra Bank Act, 2002 has been made. The introduction of new act as Nepal Rastra Bank Act, 2016 has been made effective since its establishment. This act is made under the the legal provisions of Leglislature-Parliament as act number 15 of the year 2016.

The logo of Nepal Rastra Bank is as follows :

The central bank of Nepal:-

• Formulates necessary monetary policies 

• Issues money, coins and banknotes. 

• Foreign exchange policies 

• Maintain the stability of price 

• Consolidate balance of payment for sustainable development of the economy and 

• Develops a secure, healthy and efficient system of payment 

- in order to regulate,inspect and supervise the financial system in appropriate manner.

Nepal Rastra Bank constantly works for the enhancement of public credibility towards the entire banking and financial system of the country.

RESTRICTED FUNCTIONS OF NEPAL RASTRA BANK

As we generally know that, being a central bank of Nepal, the Nepal Rastra Bank has a lots of powers. But, today my objective is to make you aware about some of the situations that don't come under the power of this bank.

There are some restrictions to the functions of the central bank of Nepal. 

Therefore, the bank should not carry out following types of functions:

• Providing any loan, accepting any type of deposit or making any type of financial gift. 

• Purchasing shares of any commercial bank, financial institution, public corporation or a company or acquiring any type of proprietary right in any financial, commercial, agricultural, industrial or other institution. 

• Carrying out any type of business; and 

• Acquiring right over movable and immovable property by way of - purchase,lease or in any manner. Provided that, the Bank may acquire such property as required for carrying out its function or for achieving its objectives.

However, it is to be noted that, the Bank can carry out the following TWO functions despite of the above restrictions :

1. To provide loan to and invest in the shares of

- the institutions which carry out the functions helpful in carrying out the function of the Bank or in attaining its objectives, not exceeding 10% of the total capital of such institutions.

Here, "institutions which carry out the functions which are helpful in carrying out the functions of the Bank or in attaining its objectives" means :

Any institutions, companies which are exclusively engaged in :

• Evaluating, managing, protecting the security, 

• Restructuring and transferring the securities of commercial banks or of financial institutions, 

• Carrying out the function of credit rating, exchange of credit information,

• Process and transmit data, 

• Print financial instruments, 

• Clearing payments, 

• Liquidate property, 

• Produce bank notes and coins 

• Acting as trustee and 

- any other institution or companies established for carrying out similar function and prescribed by the Bank.

2. To provide loan to its own employees.

In order to obtain the vision and mission, the central bank of Nepal is seriously pursuing various policies, strategies and actions. All of these are communicated through the publication in its annual report. The directives, notifications, media releases, newsletters (samachar), conferences and bulletins are made - whenever the bank thinks fit to make a sound financial environment .

( If you like to know more about the objectives, function, duties and power of the Nepal Rastra Bank then please click to the above link. )

NOTE:

The Bank opens and operate account for :

• Government of Nepal 

• Other governmental bodies 

• Commercial banks 

• Financial institutions 

• Public corporations 

• Foreign diplomatic missions 

• Foreign central banks 

• Foreign banks 

• International organization and 

• Associations 

The central Bank shall not operate accounts for any :

• Individual public 

• Industry 

• Political organization 

The procedures for opening as well as operating such accounts is prescribed by the Bank.

PRIVILEGES ENJOYED BY NEPAL RASTRA BANK

'Is there some of the privileges or facilities given by the government to the central banks of Nepal (Nepal Rastra Bank) ?'


If 'yes' then 'what are they?'

Being the central bank of the country, 

Nepal Rastra Bank enjoys a lot of privileges and facilities from the government. 

Several exemptions from taxes, fees and other issues are given by the government of Nepal, for discharging the functions as being the central bank of Nepal.

The Bank enjoys following four kind of privileges and facilities: -


1. Exemption from all types of Taxes, Fees and Charges on its:

• Incomes 

• Capital transactions 

• Houses 

• Land 

• Assets etc. 

2. No requirement for:

• Payment of registration fee 

• Registration of the deeds of loan or 

• Refinance to be given 

- by the Bank.

3. No requirement of :

• Revenue stamps on any of the documents relating to the Bank. 

4. There would be no tax, fee, charge, duty on the export and import of :

• Bank Notes 

• Coins 

• Gold 

• Silver 

• Paper 

• Metal 

• Chemicals and 

• Other materials 

- which is to be used for printing bank notes and minting coins.

( For more details regarding currencies, click on above link.)





NOTE:

• Any channel of communication between Government of Nepal and the Nepal Rastra Bank should be made through the Ministry of Finance. 

Click here for more detail regarding :
Foreign exchange policies, rules and regulation, reserves, governmental relationships
Financial provisions
Supervision and controls done by Nepal Rastra Bank,
Action taken against commercial banks and financial institutions by Nepal Rastra Bank












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