The Central Bank has rated the development bank in Nepal as the B-Class bank. The national ranking of the financial institution is second following the commercial banks.
Opening the development bank was easy, as the government thought that more financial institutions would allow all kinds of people to access financial services. Under this initiative, Many development banks were established and approved by the central bank.
That concept brings weakness to the financial markets. It was difficult for the central bank to regulate them, because of, many financial institutions in the market.
Therefore, on the one hand, the government introduced the merger policy. And, on the other hand, increased the paid-up capital.
Result for that, several banks merged with commercial banks and some merged with the finance companies to meet the government requirement. By mid-April 2020, only 23 development banks have remained and the number will fall in the future.
Although 1 year has passed since the NRB raised the paid-up capital, many development banks have not met the requirements of the central bank.
There are three types of development banks in Nepal depending on their paid-up capital and area of operations.
- 1- 3 districts operation
- 4- 10 districts operation
- nationwide operation.
The present requirement of paid-up capital for the development bank is NRs.500 million, 1.2 billion, and 2.5 billion respectively. Despite, the categorization they provide similar services.
The functional area of a development bank in Nepal
list of a development bank in Nepal[table id=9 /]
Development banks in Nepal give their customers a high interest in deposits and they also have a high interest in their loan products. Most of the development banks provide the modern banking including, ATM, mobile banking, and internet banking.
However, the B-Class banks in Nepal run with a high-profit margin they have no choice without merging with other financial institutions to meet the government requirement of paid of Capital or raise the fund internally for paid of Capital.