Nepal’s banking sector has seen significant growth and reforms over the past few decades. The banking system plays a crucial role in the economic development of the country by mobilizing funds and providing credit for productive purposes.
Banks in Nepal can be broadly categorized into four types – commercial banks, development banks, finance companies, and microfinance banks. Each type serves a distinct purpose and clientele.
The central bank of Nepal is Nepal Rastra Bank which regulates and supervises the banking sector. As of July 2022, there were 27 commercial banks, 79 development banks, 79 finance companies and 44 microfinance banks licensed to operate in Nepal. The number of bank branches reached 7,952 in mid-2022 across the country.
Let us take a look at each of these bank types in more detail.
Overview of different types of banks in Nepal
There are four main types of banks operating in Nepal – commercial banks, development banks, finance companies, and microfinance banks. Here is an overview of each type:
- Oldest and largest type of banks in Nepal
- Provide full range of banking services like deposits, loans, trade finance, remittances etc.
- Mostly focus on corporate banking and high networth individuals
- 27 commercial banks in Nepal as of July 2022
- Example: Nepal Bank Limited, Rastriya Banijya Bank, Nabil Bank, Standard Chartered Bank Nepal
- Emerged after commercial banks to provide financial access to productive sectors
- Provide services like deposits, loans, remittances
- Focus on retail lending, SMEs, agricultural, tourism sectors
- 79 development banks in Nepal as of July 2022
- Example: Agricultural Development Bank, Nepal Development Bank, Global IME Bank
- Provide limited banking services compared to commercial banks
- Specialize in vehicle financing, housing loans, hire purchase financing, personal loans
- Cater to urban middle class and businesses
- 79 finance companies in Nepal as of July 2022
- Example: Everest Finance, Progressive Finance, Goodwill Finance
- Provide microfinance services to low income individuals and groups
- Small savings and credit products for rural households and microenterprises
- Interest rates higher than banks but easy accessibility
- 44 microfinance banks in Nepal as of July 2022
- Example: Swablamban Laghubitta Bikas Bank, Nerude Laghubitta Bikas Bank, Chhimek Laghubitta Bikas Bank
So in summary, commercial banks are the largest players serving corporate sector. Development banks focus on priority sectors like agriculture, SMEs. Finance companies provide consumer financing while microfinance banks provide grassroot financial services. Each type serves a distinct purpose in Nepal’s financial system.
Commercial Banks in Nepal
Commercial banks are the oldest and most established type of banks in Nepal. They provide a wide range of financial products and services to individuals, businesses and corporations.
Here are some key facts about commercial banks in Nepal:
Total number: There are 27 commercial banks in Nepal as of July 2022. Some of the major commercial banks include Nepal Bank Ltd, Rastriya Banijya Bank, Nabil Bank, Standard Chartered Nepal, Himalayan Bank.
Ownership: Nepal Bank Ltd is the only fully government owned commercial bank.
Rastriya Banijya Bank has majority government stake. Others like Nabil Bank, Standard Chartered Nepal are joint venture banks with foreign partnership. There are also private commercial banks like Himalayan Bank fully owned by Nepali entrepreneurs.
Services: Commercial banks provide full scale banking services including:
- Deposit accounts like savings, current, fixed
- Loans like housing, auto, personal, business
- Trade finance services like LC, LG, bank guarantees
- Remittances and money transfer
- Treasury and cash management services
- Internet banking, mobile banking, debit/credit cards
Clients: Commercial banks mostly cater to corporate clients and high networth individuals. Their products and services are targeted towards the urban elite and established businesses.
Regulation: Commercial banks are regulated by Nepal Rastra Bank under Banking and Financial Institutions Act (BAFIA) and must maintain specified capital adequacy ratio.
Branches: As of mid-2022, commercial banks had 2,646 branches across Nepal covering all 77 districts. Their extensive branch network allows outreach across the country.
Performance: In fiscal year 2021-22, the 27 commercial banks had total deposits of NPR 3.69 trillion, total loans of NPR 3.51 trillion and net profits of NPR 58.32 billion. They account for over 80% of the total deposits and credits.
So in summary, commercial banks are the backbone of Nepal’s banking and financial sector serving the corporate sector and wealthy demographic mostly in urban areas. Their scale, service portfolio and outreach makes them the dominant players in the industry.
Development Banks in Nepal
Development banks play an important role in Nepal’s financial system by providing access to finance for productive sectors like agriculture, SMEs, tourism etc. Here are some key facts:
Total number: There are 79 development banks in Nepal as of July 2022. Some of the leading ones include Agricultural Development Bank, Nepal Development Bank, Global IME Bank.
Ownership: Development banks have mixed ownership structures. Some are joint ventures with foreign partners while others are fully Nepali owned private entities.
Services: Development banks offer most regular banking services including:
- Deposit accounts like savings, fixed, current
- Loans for agriculture, SMEs, housing, education
- Remittance and money transfer
- Limited trade finance and treasury services
- Internet banking and mobile banking
Clients: Development banks largely focus on retail clientele in urban and rural areas. They serve SMEs, farmers, individuals – demographics underserved by commercial banks.
Regulation: Development banks are regulated under BAFIA by Nepal Rastra Bank. They must maintain specific capital, liquid assets and reserves.
Branches: As of mid-2022, development banks had 1,822 branches across Nepal covering all districts. Their reach extends to remote areas.
Performance: In fiscal year 2021-22, the 79 development banks had total deposits of NPR 481 billion, total credit of NPR 518 billion and net profits of NPR 13 billion.
In summary, development banks play a key role in furthering financial inclusion and providing credit in priority sectors in Nepal. Their retail focus makes them more accessible for SMEs and individuals across the country.
Finance companies in Nepal provide limited banking services and specialize in consumer financing for vehicle loans, housing loans, hire purchase financing etc. Here are some key details:
Total number: There are 79 finance companies licensed in Nepal as of July 2022. Some leading names are Everest Finance, Progressive Finance, Goodwill Finance.
Ownership: Most finance companies are private entities with Nepali ownership. Some have joint ventures and FDI.
Services: Finance companies provide limited services including:
- Fixed and recurring deposits
- Vehicle loans
- Housing loans
- Hire purchase and lease financing
- Personal loans
- Insurance services
Clients: Finance companies largely cater to the urban middle class, salaried individuals and smaller businesses seeking vehicle, equipment or housing loans.
Regulation: Finance companies are regulated under BAFIA by Nepal Rastra Bank. They have lower capital and reserve requirements than banks.
Branches: As of mid-2022, finance companies had 671 branches, mostly concentrated in urban areas and cities where demand for their services exist.
Performance: In fiscal year 2021-22, the 79 finance companies had total deposits of NPR 126 billion, total credit of NPR 234 billion and net profits of NPR 4.3 billion.
In summary, finance companies fill an important gap in Nepal’s financial system by providing consumer financing services to the growing urban middle class. Their niche offerings complement the banking sector.
Microfinance banks in Nepal provide small savings, credit and microinsurance services to low income groups and microenterprises. Some key aspects:
Total number: There are 44 microfinance banks in Nepal as of July 2022. Leading ones include Swablamban Laghubitta Bikas Bank, Nerude Laghubitta Bikas Bank.
Ownership: Microfinance banks are private entities with domestic ownership, funded through government programs, development funds and private capital.
Services: Microfinance banks offer basic services including:
- Small savings accounts
- Microcredit and group lending
- Remittance facilities
Clients: Microfinance banks largely serve the rural poor, marginalized groups, women entrepreneurs, agricultural workers, microenterprises. They enable financial inclusion.
Regulation: Microfinance banks are regulated under BAFIA by Nepal Rastra Bank. Regulatory requirements are lower than for commercial banks.
Branches: As of mid-2022, microfinance banks had a total of 1,813 branches covering all districts. Their penetration in rural areas is extensive.
Performance: In fiscal year 2021-22, the 44 microfinance banks had total deposits of NPR 88 billion, total credit of NPR 160 billion and net profits of NPR 2.3 billion.
In summary, microfinance banks serve a vital role in providing grassroot financial services and supporting livelihoods of the rural poor and marginalized groups in Nepal. Their outreach enables inclusive economic development.
- There are four main types of banks in Nepal – commercial banks, development banks, finance companies and microfinance banks.
- Commercial banks are the largest and provide full suite of banking services to corporate sector and urban elite.
- Development banks focus on providing credit and services to productive sectors like agriculture, SMEs, tourism for wider financial inclusion.
- Finance companies specialize in consumer finance like vehicle loans, housing loans for the urban middle class.
- Microfinance banks provide small scale savings, credit and microinsurance services for the rural poor and marginalized groups.
- The central bank Nepal Rastra Bank regulates all banks and financial institutions under Banking and Financial Institutions Act (BAFIA).
- As of July 2022, there were 27 commercial banks, 79 development banks, 79 finance companies and 44 microfinance banks in Nepal.
- The different types of banks serve distinct clientele and enable financial access across the spectrum – from corporate sector to rural microenterprises.
- The banking sector has expanded significantly in reach and services across Nepal over the past decades supporting the country’s economic development.