Financial institutions

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Financial institutions

a) Agricultural development Bank (ADB/N):

It has been contributing to the socio-economic development of the rural populace of the country by providing the rural credit extensively.
It occupies more than 71% share of institutional credit.
The major aim is to collect urban resources thereby mobilize savings in the form of rural credit in order to fulfill the demand of rural populace so far.

Specific objectives of ADB/N

To provide institutional credit to support the needs of rural people.
To supply credit for promoting technical activities.
To mobilize urban resources in the rural areas.
To extend credit services in cottage & Agro-based industries.
To support poverty reduction program through different target oriented micro-credit & micro finance programs.

Major Activities of ADB/N

It provides credit for farm inputs including fertilizers, improved seeds, plant protection and labors.
It provides credit for the development of aquaculture, sericulture & apiculture.
It provides credit for cottage industry and Agro-based industry and also it advances credit on energy & irrigation development.
It provides credit for support services development including cold storage & warehouse construction.

Specific Activities of ADB/N for Rural Development

1) Small Farmer’s Development Programme (SFDP):

The SFDP was one of the first poverty alleviation efforts in Nepal.
Activities related to credit, savings, training, social and community development and the empowerment process are undertaken under SFDP.
Formation of groups consisting of 5-10 members is a prerequisite for program implementation. Homogeneity in terms of income status, occupation, asset holdings, locality, gender, etc. is considered during the group formation process.

Necessity of the SFDP Program Nepal

To improve the socio-economic status of the small farmers.
To create employment opportunity in the rural areas for poor people.
To utilize locally available resources in meaningful way.
To develop delivery and receiving mechanism system for accessibility of credit and other support services to the small farmers.
To empower the small farmers.
To develop independent grass-root level organization of the small farmers.

2) Small Farmer’s Co-operative Limited (SFCL’s):

A small Farmers Co-operative Ltd. is a multi-purpose designed to deliver primarily financial, but also non-financial services to its members in rural area.
SFCLs are civil society organizations, which pool their joint resources to meet basic needs & to defend their member’s interests.
They are members-owned & controlled & have an open membership policy towards “poor” farmers.

Functions:

To provide production & consumption loans to farmers.
To arrange marketing of agricultural inputs & produces.
To conduct sale & purchase of goods of daily needs.
To mobilize rural savings by accepting deposits from the farmers

3) Production Credit for Rural Women (PCRW):

PCRW was established in 1982.
The main aim of this project was to increase the livings standard of low-income families by providing rural women with access of credit.

Main Objectives of PCRW:

To increase the income of low-income families.
To develop small-scale enterprise fro women.
To establish self-reliant women’s group.
To develop a delivery system for products to support income generating projects.
To develop capacity of the women development section to increase the services for income generation projects & community development groups.

b) Cooperatives:

In Nepal co-operative was introduced officially in 1953.
Co-operative movement gained active momentum with the promulgation of co-operatives societies act and rules in 1959 and 1961 respectively.
In 1961/62 581 co-operative societies were registered and agrarian reform (1964) gave more thrust to co-operative and works as a multipurpose society.
The guided co-operative was started in 28 districts. The management of which was handed to ADB/N.

Objectives

To provide production and consumption loans.
Dealing with marketing of agricultural inputs and produce.
Supply necessary consumer goods.
Banking facilities.
Mobilizing rural credits/saving.
Taken as a change agent in rural economy of the country.

Function:

Credit delivery.
Input supply.
Marketing of agricultural produces.

c) Nepal Rastra Bank (NBR)

NRB, central bank of Nepal was established in April 26, 1956 (2013 BS Baishakh 14) under the Nepal Rastra Bank act 2012 BS.
It is an autonomous body, fully owned by government of Nepal with authorized capital of 1 crore.

Objectives of Nepal Rastra Bank:

To issue notes.
To promote the use of Nepalese currency since before its establishment Indian currency was very popular in Nepal.
To stabilize the foreign currency system with the domestic currency.
To promote banking system through out the country.
To advise the government with regard to fiscal and monetary policies for the economic development of country.
Fixation of interest rate.
To facilitate in the transactions of government.
To promote the foreign currency system with domestic currency.

Mode of operation of NRB

The board of directors, set goals and objectives and define policies, comprised of four representatives from the government, two deputy governors.
To achieve above objectives, following functions are performed.

a) Issue of notes:

Basic and prime functions of Nepal Rastra Bank is to issue notes while issuing notes it maintains 50% share from foreign security (gold, silver, foreign currency) and 50% from Nepalese currency shares, datedness issued by HMG.

b) Bankers to the government:

It maintains and operates the cash balance of government.
It buys and sells government securities in the market.
It manages the public debt.
It carries out exchange, remittance and other banking operation of behalf of government.
It advises the government on fiscal and monetary and banking matters.
It acts as agent of government in their dealings with IMF, the World Bank international finance co-operation etc.

Function of NRB

a) Exchange, management and control

NRB, manage and controls the country foreign exchange reserves and external value of the rupee. It’s the only authority that controls the receipt and payments of the foreign currency.

b) Financing in priority sector

It can regulate the commercial bankers to finance in priority sector like agricultural, small-scale industries at confessional interest set by government.

c) Control of credit

It controls the money supply and credit in the country to stabilize the price and to meet the different economic condition of the country.

d) Publication of economic indicators of the country:

Nepal Rastra Bank is the ultimate authority, which reveals different data on money supply, credit situation balance of payments, exports, and imports, balance of payments pertaining to economy of country.

e) Contribution in the development of financial institutions:

Through purchase of shares and providing loan, it helps go promote the development of different financial institution.

f) Contribute in the development of banking system:

It can contribute in the development of banking system by regulating all banks to open branches in remote areas of country and also by motivating the public to bring rural banks in the country e.g. Eastern Rural Development Bank.

g) Training facility:

It organizes different training programs to develop skilled staff through out the country.

d) Commercial Banks

Commercial banks are those banks, which pool together the saving of community and make arrangements for their productive use.
They accept deposits from public on demand or on short notice.
They are restricted to invest their in corporate securities.
Their business is confined to financing the short-term need of trade and industry such as working capital financing.
They grant loans in the form of cash credits and overdrafts.