Banking and Financial Sector of Nepal
Domain scope
This section tests how Nepal's banks and financial institutions (BFIs) are classified, licensed, prudentially regulated and connected through the payment system. Expect questions on class A to D institutions, NRB supervisory tools and deposit protection.
Classification under BAIPA 2073 (2017)
- Class A commercial banks: full-service banking, demand deposits, trade finance, remittances and large lending.
- Class B development banks: development-oriented lending, often regional or sectoral, but licensed to take deposits and lend.
- Class C finance companies: narrower lending such as hire purchase, leasing and consumer finance.
- Class D microfinance institutions: small loans, group lending and financial inclusion for low-income households. NRB licenses and inspects all classes and issues Unified Directives that consolidate prudential rules.
Prudential and safety framework
- Capital adequacy, CRR, SLR, liquidity ratios, single-obligor limits and loan classification with provisioning.
- Deposit insurance through the Deposit and Credit Guarantee Fund, up to the ceiling set by NRB.
- Payment systems: RTGS for high-value time-critical payments; NCHL operates NACH batch clearing and connectIPS; QR payments are widespread.
Worked example
A proposed institution wants to accept demand deposits nationwide and issue letters of credit. Reason: demand deposits and trade finance are core commercial banking powers. It needs a Class A commercial bank licence; a Class D microfinance licence would not permit this range.
Traps
Do not assume development banks cannot take deposits. Do not merge finance companies with microfinance institutions. Do not apply one capital or CRR figure to every class. Do not ignore NRB directives when answering supervisory questions.