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Type of financial institution in Nepal

  Banking financial institution, depository institution: Financial institution that accept deposit and channel the money into lending activities is called depository institution. Bank:  Central Bank Commercial Bank Development Bank Finance Company Microfinance Cooperatives Non banking financial institution, Contractual institution  Employee Provident Fund  Citizen investment trust Insurance companies Investment institution Brokers  Investment bank  underwriters
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Banking and Financial Instruction ACT (BFIA) 2073

BAFIA was introduced to promote public trust towards Banking and Financial Institutions. AS the Number of banking institutions increased rapidly, to control the number of Banking Institutions and increase the service quality Banking and Financial Institutions Ordinace 2061 (BAFIO-2061) was issued by the king. After the political change in Nepal, the parliament Change BAFIO-2061 ordinance into act by combining other Banking Institutions Acts into one Single Act Banking and Financial Institutions Act (BFIA). which was later amendment into BFIA 2073

Development of banking acts in Nepal.

  • Nepal Bank Act 1993
  • Nepal Rastra Bank Act 2012
  • Agriculture development Bank Act 2024
  • Nepal Infrastructure Development Co-operation Act 2046
  • Banijay Bank ACt 2031
  • Bitta Company Act 2042
  • Bikas Bank Act 2053
all above mention act are unified into the one Act which is called Banking Financial Act (BFIA ) in BS 2063 which was later amended and including arising issue at that time which was effected from 2074/01/10 Now we called BFIA-2073 

Objective of bank and Financial Institution Act

  1. Promote Public trust into Bank and Financial institution (BFIs)
  2. Enhance reliability and quality banking in State of Nepal
  3. Protect the right and interest of the depositor and investor.
  4. Protect from banking hazard and banking risk
  5. Adopt economic liberalization for the development of economic state of  Nepal
  6. Promote Corporate governance and financial stability 
  7. Make legal provisions relating to incorporation management operation and winding-up of BFIs.
  8. provide quality and reliable BFIs services to general public.
  9. maintain national economy sustainable and strong.

what are the feature of BFIA 2073

  1. it is Umbrella law
  2. integrated banking and regulation Law
  3. BFIA focused on financial Good Governance 
  4. Focused on maintain the Financial stability 
  5. Compliance with Money Laundering Act.
  6. |Allowed to Buyback shares  of BFIs
  7. Provision  to incorporate BFIs into Public Company 
  8. Protect Economic Labialization.
  9. promotions of transparency and protection of deposits.
  10. provision of two types of liquidation (Winding-up)
    • voluntary liquidation 
    • Mandator liquidation 
  11. prohibition of function  of BFIS which was clearly mention in law.
  12. Make BFIs Mandatory use of KYC (Know your customer)
  13.  provision for use and Function of External and internal Auditor 
  14. Merger and/or acquisition of BFIs
  15. Special provision for use and function of Infrastructure Development Bank
  16. Provide power to NRB to act as a banks of Bank or final decision maker  in any issue/ conflict arise
  17. Classified BFIs into 5 Categories 
Types of Bank Categories of Bank
Commercial Bank A Class licensed Institution By NRB
Development Bank B Class licensed Institution By NRB
Financial Companies C Class licensed Institution By NRB
Micro-Finance Companies D Class licensed Institution By NRB
Infrastructure Development Bank Infrastructure Development Bank
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