Banking sector is a key component of the economic system of a country. They do not just collect and mobilize scattered and small savings of a country. They have a huge role to play in credit creation and capital formation. The lending business of banking sector always has positive and multiplier effects on national GDP and economic growth. In this conterxt, the role of banking sector in economic development can be further explained as under:
- Promotion of Saving: Banks offer different deposit schemes. These deposit schemes promote the saving habits of children, homemakers, students and salaried persons. Deposit products of banking sectorare offering attractive interest rates, easy card and digital banking facilities, security of deposited sum etc. to induce and encourage saving.
- Monetization of Economy: RBB has a wide banking network spread throughout Nepal. Through such an extensive network, it is providing all types of banking services from urban to rural areas. This has contributed to bringing in a large pool of people, institutions, industries, local bodies etc. into the banking system which contributes towardsthe monetization of the Nepalese economy.
- Multiple Sector Support Through Credit: banking sectorhas been offering credit facilities at a reasonably lower interest rate than other banks of Nepal. It is providing loans for the different needs of an individual or business. It offers retail loans, business loans, agriculture loans, trade finance facilities etc. Such provided credit is not just helping the set up of these sectors but also growth, expansion and development of these sectors with sustainability. This credit creation of banking sectoris contributing towards the capital formation, industrialization, agriculturalizaiton and entrepreneurship in the country which has a multiplier and positive in the national economy of GDP.
- Remittance Service: Remittance is a crucial base of the Nepalese economy. banking sectorhas an extended branch network even at a remote location of the country. This remarkable branch network and loyal customer base inside and outside the country is providing excellent remittance service. People can receive remittances sent from any country from any banking sectorbranch. It has tied up with remittance service with most of the remit agencies including its own banking sector Remit which can be used for sending money from any country of the world and receiving the sent sum from any banking sectorbranch.
- Economic Digitalization: banking sectoris providing different online and digital services to its customers. This is making its service easily accessible through online and digital platforms. The number of customers using ATM cards, mobile banking and internet banking is growing rapidly and the satisfied customer base is rising too. Similarly, other facilities are also being initiated and offered by banking sectorwhich is bound to have a significant contribution tothe economic digitalization of Nepal. cities like QR payment, POS, connect IPS etc. which is remarkably contributing towards the economic digitalization of Nepal.
- Entrepreneurship and Priority Sector Support: banking sectors supporting entrepreneurship in Nepal, especially for youth and women. It is providing both collateral-free and interest subsidized loans to them as well as a credit facility developed on its own. It is also supporting priority sectors like agriculture, energy, tourism, manufacturing, etc. solely or with consortium financing. Further banking sectors also involved in the construction of national pride projects. All this is contributing to the prompt development of the Nepalese economy.
- Entrepreneurship and Priority Sector Support: banking sectors supporting entrepreneurship in Nepal, especially for youth and women. It is providing both collateral-free and interest subsidized loans to them as well as a credit facility developed on its own. It is also supporting priority sectors like agriculture, energy, tourism, manufacturing, etc. solely or with consortium financing. Further banking sectors also involved in the construction of national pride projects. All this is contributing to the prompt development of the Nepalese economy.
- Facilitation of International Trade: banking sectoris providing different international trade-related facilities to importers and exporters. It issues a letter of credit as well as transfers payment through electronic means like SWIFT and TT with reasonable charge. Apart from this facilities like foreign exchange and a bank guarantee provided by banking sectorhas also appreciable contribution international trade of Nepal.
- Implementation of Fiscal and Monetary Policy: banking sectorhas a huge role in the implementation of fiscal and monetary policy in Nepal. Different policies like subsidized loans, deprived sector lending, distribution of social security payment etc. initiated by fiscal policy and guided by a monetary policy are implemented by banking sectorl. Most government transactions including budgetary transfers, revenue collection, custom duty collection, project funds etc. are conducted through a baning system of RastrtruiyaBanijya Bank.
- Financial Access and Literacy: banking sectorhas a highly diverse branch network from rural to geographical locations. Thus, it is the most accessible bank of Nepal as it is providing service in remote areas where other banks are not willing to go and serve. Further, its financial literacy is one of the most effective programs conducted by BFIs. This is because it runs such programs to those remote and downtrodden communities who are in actual need of financial literacy as they are most unfamiliar with bank and banking services.
- Capital Market Services: BANKING SECTORhas already established its own subsidiary company in the name of BANKING SECTOR Merchant Banking Limited to provide capital market-related services. It is providing arrangements and facilities for companies that are making an issue of IPO (Initial Public Offering), FPO (Further Public Offering) and right or bonus shares. Apart fromthis it is offering DEMAT account opening, CASBA and MeroSHare registration from all its branches throughout the country. This has significant contribution in taking share and capital market literacy or awareness to rural communities.
- Employment Opportunities: With its support to different in industries, businesses, enterprises and trade companies, BANKING SECTORis providing higher employment opportunities for more people. Further, BANKING SECTORitself is employing numerous people to operate its extended branch network throughout the country.
