NRB Assistant key terms

The central bank of Nepal, established in 1956 under the Nepal Rastra Bank Act. It issues currency, regulates banks and financial institutions, manages foreign exchange reserves, and formulates monetary policy to maintain price stability and support economic growth.

The process by which a central bank controls the money supply and credit conditions to achieve macroeconomic goals such as low inflation, stable exchange rates, and adequate liquidity. In Nepal, NRB announces it annually and uses tools like the bank rate, CRR, and open market operations.

The minimum percentage of a bank's total deposits that must be held as cash reserves with the central bank. NRB uses CRR to influence liquidity; raising it absorbs funds from the banking system, while lowering it injects liquidity.

The minimum share of deposits that a bank must hold in liquid assets such as cash, gold, or government securities. In Nepal, NRB sets SLR to ensure banks can meet depositor withdrawals and to control credit expansion.

The interest rate at which the central bank lends to commercial banks, often against eligible securities. NRB's bank rate serves as a reference for other interest rates and signals the stance of monetary policy.

Buying and selling of government securities by the central bank in the open market to adjust liquidity. In Nepal, NRB uses OMO to manage short-term liquidity and influence short-term interest rates.

Short-term government debt instruments issued by Nepal Rastra Bank on behalf of the government to raise funds and manage liquidity. They are sold at a discount and redeemed at face value, with maturities typically of 28, 91, 182, or 364 days.

Nepal's law governing the establishment, operation, and regulation of banks and financial institutions. It empowers NRB to license, supervise, and take corrective action against institutions, and sets capital and governance requirements.

A commercial bank licensed under BAFIA to conduct all types of banking transactions, including accepting demand deposits, lending, and foreign exchange operations. Class A banks are subject to the highest capital and regulatory requirements.

A development bank licensed under BAFIA. It primarily provides medium- and long-term credit to industry, agriculture, and tourism, and may accept deposits, but its permitted activities are narrower than those of Class A commercial banks.

A finance company licensed under BAFIA. It focuses on hire purchase, leasing, housing loans, and other specialized financial services, and is restricted from accepting demand deposits and from certain commercial banking activities.

A microfinance institution licensed under BAFIA to provide small-scale financial services, mainly to low-income and rural clients. It is subject to specific lending ceilings and is prohibited from accepting large deposits.

A loan on which the borrower has failed to make scheduled interest or principal payments for a specified period, typically 90 days or more. High NPL ratios weaken bank profitability and can threaten financial stability.

An expense set aside by a bank to cover estimated losses from loans that may not be repaid. NRB prescribes provisioning percentages based on loan classification, and shortfalls in provisioning reduce a bank's capital.

A measure of a bank's financial strength, calculated as capital divided by risk-weighted assets. NRB requires banks to maintain a minimum CAR to absorb unexpected losses and protect depositors.

A global regulatory framework developed by the Basel Committee on Banking Supervision that strengthens bank capital requirements, introduces liquidity standards, and limits leverage. Nepal Rastra Bank has adopted Basel III norms for banks in Nepal.

A Basel III standard requiring banks to hold enough high-quality liquid assets to survive a 30-day stress scenario. NRB uses LCR to monitor short-term liquidity resilience of banks.

A system that protects depositors up to a specified limit if a bank fails. In Nepal, the Deposit and Credit Guarantee Fund provides insurance coverage for deposits in banks and financial institutions.

The process of ensuring that individuals and businesses have access to affordable and useful financial products and services, such as savings, credit, insurance, and payments. NRB promotes it through branch expansion, microfinance, and digital banking policies.

The knowledge and skills needed to make informed financial decisions, including understanding interest, budgeting, savings, and risks. NRB and other bodies run financial literacy programs to improve public awareness and responsible borrowing.

Holdings of foreign currencies, gold, and other reserve assets held by the central bank. NRB uses reserves to intervene in the foreign exchange market, pay for imports, and maintain confidence in the domestic currency.

A systematic record of all economic transactions between residents of a country and the rest of the world over a period. It includes the current account, capital account, and financial account, and is used to assess external sector stability.

The price of one currency expressed in another. Nepal maintains a pegged exchange rate with the Indian rupee, and NRB manages the value of the Nepalese rupee against other currencies through intervention and policy.

A sustained increase in the general price level of goods and services, reducing purchasing power. NRB monitors inflation using the consumer price index and aims to keep it low and stable through monetary policy.

A measure of the average change over time in the prices paid by consumers for a basket of goods and services. In Nepal, CPI is published by the Nepal Rastra Bank and used to gauge inflation.

The total market value of all final goods and services produced within a country in a given period. GDP growth is a key indicator of economic performance and influences monetary and fiscal policy decisions.

The government's use of taxation and spending to influence the economy. In Nepal, fiscal policy is formulated by the Ministry of Finance and coordinated with NRB's monetary policy to achieve macroeconomic stability.

An annual financial statement of the government's estimated revenues and expenditures. Nepal's budget is presented by the Finance Minister and outlines priorities for public spending, taxation, and borrowing.

The fundamental principle that assets equal liabilities plus equity. It underpins the double-entry accounting system and ensures that every transaction keeps the balance sheet in balance.

An accounting method where every transaction is recorded with equal debits and credits in at least two accounts. It provides a built-in error check and forms the basis of modern financial accounting.

A financial statement that reports a company's assets, liabilities, and equity at a specific point in time. It shows what the entity owns, owes, and the owners' residual interest.

A financial statement that summarizes revenues, expenses, and net profit or loss over a period. It measures the financial performance of an entity and is also called a profit and loss account.

An accounting method that records revenues when earned and expenses when incurred, regardless of when cash is exchanged. It provides a more accurate picture of financial performance than cash-basis accounting.

The recording of a business transaction in the accounting journal, showing the accounts to be debited and credited and the amounts involved. It is the first step in the accounting cycle.

A book or digital record that contains all accounts of a business, with debits and credits posted from the journal. It provides a permanent summary of transactions by account.

A statement listing all ledger accounts and their balances to verify that total debits equal total credits. It helps detect arithmetic errors before preparing financial statements.

Interest calculated only on the original principal amount for the entire period, without compounding. The formula is Principal × Rate × Time, and it is commonly used in short-term loans and deposits.

Interest calculated on both the initial principal and the accumulated interest from previous periods. It results in faster growth than simple interest and is widely used in savings and loans.

The current worth of a future sum of money or stream of cash flows, given a specified rate of return. It is used in investment appraisal, loan valuation, and financial decision-making.

The difference between the present value of cash inflows and outflows over a period. A positive NPV indicates a profitable investment, and it is a key tool in capital budgeting.