Commercial Banks

Commercial Banks are those institutions which are involved in accepting deposits and advancing loans. Generally, the term 'bank' is understood as a commercial bank. Commercial Banks are established to boost commerce, trade and industrial sectors.

The main functions of commercial banks are accepting deposit from public advancing them loans. The major functions of commercial banks are as following:

  1. Accepting Deposits (Deposit Collection)

    The most important function of commercial bank is to accept deposits from public. Various sections of the society according to their needs and economic conditions deposit their money in the bank, keeping the needs and interest of the society, bank formulate various deposit schemes. i.e.

    1. Current Deposit:

      2. A current deposit, also known as a current account, is a non-interest-bearing bank account designed for frequent transactions, offering unlimited deposit and withdrawal facilities for individuals, businesses, and institutions. It provides convenient access to funds through cheques, internet, and mobile banking, facilitating daily business operations and personal financial management.

    2. Saving Deposit:

      A savings deposit, also known as a savings account, is a basic financial product that allows individuals to store money safely and earn interest on it. Unlike checking accounts, savings accounts are designed for accumulating funds rather than frequent spending, often with limits on withdrawals and other transaction features. They provide accessibility to your funds when needed for saving goals or emergencies while offering a secure, interest-bearing alternative to simply keeping money at home.

    3. Term Deposit:

      Term deposit is a fixed-term investment offered by banks where money is locked for a specific period at a predetermined interest rate. It provides safe, predictable returns, is low risk, and usually cannot be withdrawn early without penalty, making it suitable for conservative savers seeking stable income over time securely.

    4. Call Deposit

      A call deposit is a type of bank deposit that can be withdrawn anytime without prior notice. It usually earns lower interest than fixed or term deposits but offers high liquidity. Businesse use it to keep funds safe while still having instant access for daily transactions or emergencies.

    5. Margin Deposit

  2. Loan and Advances

    The second main function of commercial bank is to advance loan to its customers. Banks charge interest from the borrowers which is the main source of their income. The banks advance loans on the basis of deposit collection. The loan provided by banks are generally secured by proper collateral which valuation is higher than loan amount.

    1. Cash Credit
    2. Working capital
    3. Term Loans
    4. Mortgaged Loan

  3. Investment of Funds

    The banks invest their surplus funds in three types of securities - Government securities, other approved securities and other securities. Government securities include both, central and state government such as treasury bills, national savings certificate, etc.

List of Commercial Banks in Nepal

S.No. Name

Permitted Financial Transactions for Class A Licensed Institution

  1. Accepting deposits with or without interest and repaying the deposits through various financial instruments
  2. Accepting deposits, making payments, having transactions, providing intermediary services and transfer funds through various electronic medium (devices & instruments)
  3. Disbursement of credit (hire-purchase, leasing, overdrafts and housing)
  4. Disbursement of credit on project or hypothecation, collateral and disbursing and causing to be disbursed loans in consortium financing having divided collateral on pari passu according to the agreement entered into between one another.
  5. Disburse loan on the guarantee of foreign bank or FI
  6. Disbursing loans within the value covered by the movable or immovable assets which has already been mortgaged to it or disbursing loans on remortgaged within the value covered by movable or immovable assets which has already been mortgaged to other bank or financial institution
  7. Issuing guarantees, getting executed necessary bonds such customers in consideration thereof, obtaining security, and acquire their movable or immovable assets as collateral or mortgage, or the assets of third persons as collateral
  8. Availing refinance from NRB as may be necessary or lending or providing loans from other bank and financial institution
  9. Disbursing or managing loans from amount received from Government of Nepal or other native or foreign agency for project promotion
  10. Write off credits as per prevailing credits write off Byelaws
  11. Issuing shares debenture, bond and so on to meet the capital fund subject to the limitations, conditions or directives issued by the Nepal Rastra Bank
  12. Issuing, accepting, paying, discounting or purchasing and selling letters of credit, bill of exchange, promissory notes, cheques, travelers cheques, drafts or other financial instruments
  13. Issuing, accepting, managing digital card or other instruments for electronic transactions and appointing agencies to carry out acts relating thereto
  14. Foreign currency transactions subject to the prevailing laws
  15. Carrying out government transactions subject to limits, terms and conditions or directives of NRB
  16. Purchasing, selling or accepting bonds issued by NRB and Government of Nepal
  17. Remitting or transmitting funds to different places within or outside Nepal and receive from abroad to make payment thereof
  18. Act as custodian in sale or purchase of shares, debentures or securities; collecting interest etc. and also arrange safe deposit vaults for customers acting as a commission agent of its customers
  19. Carrying on off-balance sheet transaction
  20. Disbursing credits within prescribed limit of NRB, against individual or collective guarantee, for the economic up-liftment of the deprived sector people, low-income families, victims of natural calamities and inhabitants in any area of the country
  21. Exchanging with NRB or any other BFI particulars of information or notices on debtors or customers who have obtained credits form it or other bank and financial institutions
  22. Buying and selling of gold and silver bullions
  23. Conduct, study, research and do survey work relating to establishment, operation and evaluation of projects and provide training, consultancy and other information
  24. Prudently managing or selling its assets of all type to come under its ownership according to this act and prevailing laws
  25. As per the prevailing laws, giving guarantee with consent of the parties involved on matters of payment to be made or values to be recovered for performance of any act between two or more persons
  26. Carry out other functions as prescribed by the NRB