The Nepal Rastra Bank (NRB) is the central bank of Nepal, established in 1956 (2013 B.S.) under the Nepal Rastra Bank Act, 1955. It is the country’s apex monetary authority, responsible for formulating and implementing monetary policy, regulating financial institutions, managing foreign exchange, and maintaining financial stability.
Explanation:
As the central bank, NRB serves as the guardian of the financial system and the bank of the government. It plays a vital role in promoting economic stability, fostering financial sector development, and maintaining the value of the Nepalese currency. NRB supervises commercial banks, development banks, microfinance institutions, and other financial intermediaries to ensure a sound banking system.
Objectives of Nepal Rastra Bank:
According to the Nepal Rastra Bank Act, 2002, the main objectives of NRB are:
- To formulate and manage monetary and foreign exchange policies to maintain price and balance of payments stability.
- To develop a secure, healthy, and efficient payment system in the country.
- To regulate, inspect, and supervise banks and financial institutions to ensure financial stability.
- To support the government’s economic policies for sustainable development and growth.
Major Functions of Nepal Rastra Bank:
- Monetary Policy Formulation:
Designs and implements monetary policy to control inflation, stabilize prices, and promote economic growth. - Currency Issuance:
Sole authority to issue the national currency, the Nepalese Rupee (NPR). - Banker to the Government:
Manages government accounts, public debt, and provides loans to the government when necessary. - Bankers’ Bank:
Provides services to other banks, including clearing, settlement, and liquidity support. - Regulation and Supervision:
Monitors and regulates financial institutions to maintain transparency and solvency. - Foreign Exchange Management:
Manages foreign currency reserves and maintains stability in exchange rates. - Financial Sector Development:
Promotes access to finance, financial literacy, and inclusion, particularly in rural areas. - Research and Statistics:
Conducts economic research and publishes reports on financial and economic conditions.
Importance of Nepal Rastra Bank:
- Ensures monetary and financial stability in the country.
- Promotes economic growth and investment through sound banking policies.
- Safeguards public confidence in the banking system.
- Regulates interest rates, credit supply, and inflation control.
- Facilitates foreign trade and payment systems.
