Brief history Banking development in Nepal

1.  Ancient time
• history document shows that there was some basic operation in practise even in the ancient day
• During the period of 8th Century Guna Kamdev has borrow money to reconstruct the Kritipur.
• The Nepal Sambat calendar was established by a trader of Kathmandu named Sankhadhar Sakhwa. The calendar era began on 20 October 879 AD after paying the debt. This means there were the practise of lending money and repaying the loan even in the ancient time
2. Lichhivi Era.
• The Licchavi Kingdom, a significant period in Nepal’s history, this era marked the advent of the Classical period of Nepal. The Lichhavi coins, the first of their kind to be widely used in the Kathmandu Valley and its surrounding hills, were minted in copper. These coins bore legends in Gupta scripts, indicating a substantial cultural influence from other major kingdoms of the Classical Period.
• The Lichhavi coins, minted in copper, were the first to be widely used in the Kathmandu Valley and its surrounding hills. These coins bore legends in Gupta scripts, indicating a substantial cultural influence from other major kingdoms of the Classical Period
• These coins were not merely a medium of exchange but also carried religious significance. Some even depicted the names of the kings. The known denominations of these coins included Pana (Tamika), Purana, Pana-Purana, and Matrika. 
• Notable coins from this period include those of  Mananka (c. CE 464-505 or 557), Amshuvermam (c. CE 557–605), Vaisravana (c. CE 621), Pashupati (c. CE 641–680), Gunanka (c. CE 625–641) and Jishnu Gupta (c. CE 622–633)2. The only known conversion rate is 1 Karshapana = 16 Pana
• The only known conversion rate from this period is 1 Karshapana equal to 16 Pana.
• The coins served not only as a medium of exchange but also as a tool for disseminating religious and cultural messages
3. Malla Era.
• The Malla Era in Nepal, spanning from the 12th to the 18th centuries, was marked by significant socio-cultural, economic, and political advancements. The Kathmandu Valley, strategically positioned for trade between Tibet and India, thrived as a center for commerce. Malla rulers actively promoted economic activities, fostering a conducive environment for business.
• The monetary system was diverse, featuring various currencies. Malla kings issued their own coins, reflecting regional economic autonomy, often inscribed in Sanskrit and adorned with symbols of the ruling dynasty. This monetary system played a crucial role in facilitating trade and transactions.
• The era saw a flourishing trade network beyond the Kathmandu Valley, attracting merchants from different regions and connecting Nepal with Tibet, India, and other parts of Asia. Marketplaces in cities like Kathmandu, Bhaktapur, and Patan were vibrant hubs for trading a wide range of goods, serving as meeting points for economic interactions and cultural exchange.
• While formal financial institutions were absent, informal systems supported financial transactions. Merchants likely engaged in credit-based transactions, and moneylenders may have provided financial services to the local population.
• The economic and cultural legacy of the Malla Era persists in Nepal. Trade routes established during this time contributed to regional connectivity and cultural diversity. Coins and artifacts from the era serve as valuable historical and cultural insights into the economic life of the time.
4. banking as a merchant bank in 14th century
• The term “Tanka Dhari” was used at the end of the 14th century in Nepal, during the Malla era. The term means 'Money Dealer’, and it was one of the 64 castes classified on the basis of occupation . This indicates that money changing was adopted as a profession by a section of people in Nepal at that time .
• One notable event during this period was when Shankadhar, a Sudra merchant of Kantipur, paid all the outstanding debts in the country
5. Shah Reign
• King Prithvi Narayan Shah, is known for his significant contributions to the unification of Nepal1. He also made notable advancements in the country’s economic status.
• One of the key financial institutions during his reign was the "Kausi Toshi Khana". This institution functioned as a banking agency. It played a crucial role in the initial steps towards the development of banking in Nepal. The establishment of the “Kausi Toshi Khana” can be regarded as the first step towards initiating banking development in Nepal.
• King Prithvi Narayan Shah established the Nepal Army with Shreenath, Kali Baksh (Kalibox), Barda Bahadur, and Sabuj companies. He emphasized the building of forts, considering the land of Nepal as a natural fort created by God Himself.

After Rana took control over the country, phase wise Development in banking sector can be summarised as follow

1. before established of Nepal Bank Limited
• The establishment of ‘Tejaratha Adda’ during the tenure of Prime Minister Ranoddip Singh in 1933 B.S. was the first step towards the institutional development of banking in Nepal1. It was fully subscribed by the government in Kathmandu1. Tejarath provided credit loans to the general public at a 5 percent interest rate on securities i.e. gold, silver, and other ornaments. Its objective was to provide credit or loans to the general public but it failed to accept deposits from the public.
• During the time of Chandra Shamsher(1901-1929), credit facilities of ‘Tejaratha’ were extended by operating its branches1. 
2. after established Nepal Bank Limited. (Early Beginnings (1937 - 1956))
• Later, ‘Tejaratha’ was replaced by the first commercial bank, Nepal Bank Limited established on 30th Kartik 1994 B.S. is the first commercial bank in Nepal with authorized capital of 10 million rupees. 
• The modern banking system in Nepal began with the establishment of Nepal Bank Limited and this was a significant milestone in the history of banking in Nepal. Nepal Bank was inaugurated by King Tribhuvan Bir Bikram Shah Dev. It was established as a semi-government bank with an authorized capital of Rs.10 million and a paid-up capital of Rs. 892 thousand.
• After the establishment of Nepal Bank Limited, the banking system started to take a more modern shape.
• During this period, Nepal Bank started to work as the central bank of Nepal except for issuing notes and coins. It was nearly two decades after the establishment of the Nepal Bank, the need for a regulatory body was also felt. As a result, on April 26, 1956, Nepal Rastra Bank (NRB) was established.
3. After Establishment of Nepal Rasta Bank to before liberalization in banking sector (Establishment of Central Bank (1956 - Mid 1980s))
• Then Nepal Rastra Bank was established on B.S. 2013.01.14 as the central bank under the Nepal Rastra Bank Act 2012 B.S. Its function was to supervise commercial banks and to guide the basic monetary policy of the nation1. In 2013 B.S., the industrial Development Center was established and later it was converted into Nepal industrial Development Corporation (NIDC) in 2016B.S. As the monetary transaction got more and more complicated on 2022.10.10, Rastriya Banijya Bank was established as a fully government-owned commercial bank1. Agricultural development bank was then established in 2024.10.07 to help the agricultural side of the nation1.
• To operate all commercial banks uniformly under a single act, “Commercial Bank Act 2031” was enacted. According to the Nepal Commercial Bank act of 2031 B.S. “Commercial banks are banks that deal with money exchange, accepting deposits, advancing loans and other commercial transactions except some special functions done by specified cooperative, agriculture and industrial banks”.
• During this period, the NRB started to work as the central bank of Nepal1. It took over the responsibility of issuing notes and coins from Nepal Bank Limited, which had been functioning as a de facto central bank until then1. The NRB also played a crucial role in regulating and supervising the banking sector1.
• Several other banks were established during this period to escalate the banking system in Nepal4. These included Rastriya Banijya Bank and Agriculture Development Bank, which were established to cater to different sectors of the economy143
4. after liberalization in banking sector before merger phase. Liberalization of Banking Sector (Mid 1980s - 2010)
• The liberal economic policy initiated in the mid-eighties marked the beginning of financial sector liberalization. This led to a significant expansion in the number of Banks and Financial Institutions (BFIs) in the country. The banking sector in Nepal has since grown rapidly, with many new commercial banks and financial institutions being established
• Mid-1980s - Financial Sector Liberalization: The liberal economic policy initiated in the mid-eighties marked the beginning of financial sector liberalization1. This led to a significant expansion in the number of Banks and Financial Institutions (BFIs) in the country.
• Establishment of New Banks: During this period, several new banks were established. For instance, Rastriya Banijya Bank (RBB) was established in 2022 BS (1965 AD) as the second commercial bank in Nepal. Similarly, Agriculture Development Bank (ADB) was established in 2024 BS (1967 AD). In 2062 BS (2005 AD), ADB was converted to Agriculture Development Bank Limited (ADBL) and got the license as a commercial bank.
• Growth of Banking Sector: By mid-July 2010, total assets and total deposits in the banking sector amounted to Rs 996.1 billion and Rs 795.3 billion respectively. The total loans amounted to Rs 622.6 billion.
• Challenges and Issues: Despite the growth, the banking sector in Nepal faced several challenges during this period, including issues related to governance, risk management, and financial inclusion.
5. after merger in banking sector Till now
• In the year 2068 B.S. ( 2011 A.D.), the Central Bank of Nepal (Nepal Rastra Bank), introduced merger bylaws. This move was aimed at encouraging numerous banks to consider mergers and acquisitions. The objective was to reduce the number of financial institutions in Nepal, thereby promoting the establishment of banks with higher capital and fostering market competition.
• During this period, the minimum capital requirements for banking and other financial institutions were raised. This strategic move was designed to compel these institutions to consider mergers or acquisitions. Since 2068, the emphasis has been on financial consolidation and the holistic development of financial institutions.
• Expansion of Commercial Banks: The asset share of commercial banks has shown a continuous increase as it increased from 77 percent in 2010 to 83 percent in 20181. Commercial banks have reached 750 out of 753 local levels formed after the country’s transition to federalism.
• Bank Account for All Nepalis Program: After the launch of a program called ‘Bank Account for All Nepalis’, the number of bank accounts has increased due to increased financial literacy. In four states, banks have reached all local levels.
• Decline of Development Banks and Financial Companies: The share of development banks and financial companies has declined gradually.
• Increase in Microfinance Development Banks: However, microfinance development banks’ share has increased gradually.
• Impact on Economic Growth: The financial sector reform program initiated in Nepal since the 1980s has had a very strong far-reaching impact on the development of the banking sector and economy.
• Today, there are 27 ‘A’ Class Commercial Banks, 20 ‘B’ Class Development Banks, 22 ‘C’ Class Finance Companies, 85 ‘D’ Class Microfinance Companies and one Infrastructure Development Bank. These banks and financial institutions provide a wide range of financial services, from savings and loans to investment banking.