Banking History in Nepal

 Bank is the financial institution which provides financial service and it also deals with money and credit. It accepts deposits from the public and mobilizes the money to the productive sectors. Bank is the commercial institution which aims to earn profit with the different types of commercial activities. It is also called the financial supermarket. At present, it also provides remittance facility, exchange currency, bills of exchange, underwriting, bank guarantee etc.

In Nepal money transaction was started by “Tejarath Adda” in 1933 BS and it used to provide loans to the employee. It was the first informal transition of the banking in Nepal.
Nepal’s formal banking began in 1994 with the establishment of Nepal Bank Limited which was the first commercial bank of Nepal. Nepal Rastra Bank (central bank of Nepal) was set up in 2013, which was approved by formal His Majesty Government (HMG) and the Rastriya Banijya Bank, another commercial bank was set up in 2022. Until 2040 Nepal’s financial sector was closed for joint venture of foreign banks. After 2040 the government gradually liberalized and opened up the sector, resulting in the rapid entry of foreign banks. Since then it has led to the establishment of good number of private banks. Nabil Bank was the first private commercial bank of Nepal. And we have 31 Commercial Banks till date.
Some banking history of Nepal
• Banking started in Nepal with the establishment of Nepal Bank Limited in 1994 BS (1937) which was initiated from the government sectors.
• Nepal Rastra Bank was the central bank of Nepal which was established in 2013 BS ( 1956) and it is located at Baluwatar, Kathmandu

Cooperative in Risk

 A high-level probe commission formed to investigate troubled cooperatives on Monday confirmed individual depositors’ money worth Rs 9.63 billion put in 130 troubled cooperatives is at risk. The amount includes Rs 7.25 billion is individual deposits, while the rest is interest.

Oriental Cooperative has the largest liabilities — worth more than Rs 6 billion. Its Kathmandu office alone has to pay back Rs 3.43 billion to the depositors, while the Bhaktapur branch has to pay Rs 740.29 billion. Besides Kathmandu and Bhaktapur, Oriental has offices in Lalitpur, Pokhara, Syangja, Biratnagar and Parsa.

Of the total 12,461complaints registered against troubled cooperatives, 11,286 complaints are against Oriental. Oriental’s biggest individual depositor is Tara Devi Dhakal of Damak, Jhapa, who has Rs 190 million deposited in the cooperative.

Oriental Chairman Sudhiar Basnet not only has to pay back to the depositors, but also to those who have made up-front payment for his housing projects, many of which are incomplete. He also has liabilities to banks.
Against the banking norms, Basnet poured Oriental’s deposits into his housing projects, which could not complete due to a recession in the real estate sector for the last four years. The commission’s chairman Gauri Bahadur Karki said Basnet has been working to complete his housing projects in Imadol, Sanepa and Naxal.

Problem after merger

 Merger and Aquisition of banking industry is necessary in context of Nepal there are lots of financial instituion but they are only foucssed in urban area not in rural area plus all banking products are only for wealthy people who can afford to provide security like land and building. In Nepal one need to have backup property like Land and Building in order to get loan. If you only have plan but no back up then you can hardly get loan. Subsidies loan like Deprive Sector Loan, Women Enterpreniorship Loan, Agriculture Loan are only for wealthy person. So, merger is necessary for Nepalese Banking Industries.  However, merger and acquision may arrisee problem which may be as under

a) Informal Group

b) Biasness in Incentive

c) Biasness in Promotion

d) Pressure from superior( Big portion Share holders bank) to inferior ( Small portion shsare holder) 

e) Lay off

f) Time to cope up with system