Unit 1

Introduction to the Business

of Bank
 Content
• Meaning,
• Origin and necessity of bank and financial
institutions,
• an overview of Nepalese financial system,
• Distinguish between banking and other business.
Concept of bank and
Jock of Bob Hope
“a bank is a financial institution where you can borrow
money only if you can prove you don’t need it”
• Financial intermediary, deposit taking institution, role of
intermediation
• It makes trade easy (goods and services and fund)
• Large part of financial service industry
• Dominant role in economic development
• Most regulated area of the economy
 Meaning
• According to Nepal Rastra Bank Act (2002),
“Bank is a financial institution, which provides financial services that
may be in the form of accepting deposits, advancing loan, providing
necessary technical advices, dealing over foreign currencies, remitting
funds, etc.”
• According to Joanes
“Bank is an organization offering financial services, especially loans
and the safekeeping of customer’s money”.
• According to shorter oxford English dictionary,
“A bank is an establishment for the custody of money, received from or
on behalf of each customer. Essential duty is to pay their draft on each
profit area from its use of the money left unemployed by them.”
 Contd …
• On the basis of economic function it serves:
They are financial intermediaries involved in transferring fund
from savers to borrowers
• On the basis of the services it offers to its customers:
General financial service providers: checking and debit accounts;
credit cards; saving plans; loan for customers, business and
government; investment banking; insurance protection; financial
planning; advice for merging companies; sale of risk management
services; agency services and more.
• On legal basis:
As defined by act (what should they do and what should not do)
Origin
The word bank is derived from the Latin word "bancus" which
means bench. In the ancient time the Italian goldsmiths used to sit
on benches when they are in work of exchanging of money; trading
of gold and silver. The word bench means "Bank" in German,
"Banca" in Italian and "Banquee" in French, from which it used as
"Bank" in English language.
History of banking:
Services Offered by Bank (for centuries)
• Carrying out currency exchange
• Discounting commercial notes and making business loan
• Offering saving deposits
• Safekeeping of valuables and certification of value
• Supporting government with credit
• Offering checking accounts
• Offering trust services
Service in past century
• Granting consumer loans
• Financial advising
• Managing cash
• Offering equipment leasing
• Making venture capital loan
• Selling insurance policies
• Selling and making retirement plans
• Offering security brokerage and investment banking
• Offering mutual funds, annuities
• Offering merchant banking services
• Offering risk management and hedging services
An Overview of Nepalese Financial System