Bank Ko ABC – What a Bank Really Is and How Nepal's Banking World Is Built

 

Banking Taiyari Nepal: From Zero to Expert

Banking Taiyari Nepal, Part 1 of 5

A plain-language guide for Nepal banking job preparation. Every term comes with its meaning and the reason banks use it. Figures and limits change often, so confirm current numbers on the NRB website.

Sita and the Biscuit Tin

Sita opens a small momo shop near Ratna Park. By the end of the first month, she has Rs 1,80,000 in cash. Where does she keep it? Under the mattress? In a biscuit tin behind the steamer? Her brother says, "Keep it in the shop, I will watch it." Her neighbour says, "Put it in the dhukuti, you will earn something."

Then one night, a rat chews through a few notes in the tin. Another night, she hears a noise in the shop and cannot sleep. Cash at home has three enemies: thieves, accidents and her own spending habits.

So Sita walks into a bank. She hands over her cash, signs a few papers, and gets a small book and a card. The cash is now safe. And something interesting has started: the bank will now use her money. Understanding that one sentence is the heart of banking.

From Dhukuti to Bank: The Same Idea, Bigger Scale

If you grew up in Nepal, you already know the basic idea of banking. Take dhukuti. Twenty neighbours each put in Rs 5,000 every month. Every month, one member takes the whole pot, Rs 1,00,000, and uses it for a wedding, a shop or a motorbike. After twenty months, everyone has had a turn.

Now look carefully at what dhukuti does:

1. It collects small savings from many people.
2. It gives a large sum to one person who needs it now.
3. It depends on trust. If one member runs away, the whole group suffers.

A bank is dhukuti with four upgrades:

• A licence and a regulator. The government (through Nepal Rastra Bank) checks the bank. A neighbour cannot check a dhukuti.
• Professional judgement. Trained staff decide who gets the money and how much.
• Rules and records. Every rupee is written in a system.
• Money for everyone, anytime. You do not wait for your turn in a circle.

Older Nepalis also remember the sahu-mahajan, the local moneylender who lent at very high interest and kept your land papers. The bank is, in a way, the organised, rule-bound version of the same job, with fixed rates, written contracts and a regulator watching.

The one-line definition for exams: A bank is a licensed financial institution that accepts deposits from the public and uses those funds to give loans and provide other financial services.

How a Bank Earns: Buy Money, Sell Money

Here is the simplest way to see a bank: a bank is a shop that buys money and sells money.

• It buys money by taking deposits. The price it pays is the interest on deposits.
• It sells money by giving loans. The price it charges is the interest on loans.
• The difference is the bank's main earning. This is called the interest spread.

Example with Sita's money. Say the bank pays Sita 5% on her savings and lends the same money to a furniture shop at 11%. The gap, 6 points, is the bank's gross margin. From that gap the bank must pay staff, rent, electricity, IT systems, security, taxes, and also cover loans that never come back. Whatever is left is profit.

Banks also earn fee income or non-interest income:

• Account opening and maintenance charges
• ATM and card fees
• Remittance commission
• Loan processing fee
• Letter of credit and guarantee commission
• Foreign exchange trading gains

A good banker thinks of two numbers all the time: How cheap is my money (cost of funds)? and How safe is my lending (credit risk)? Almost every banking concept you will learn is one of these two in disguise.

The Strange Truth: Your Deposit Is the Bank's Liability

This confuses almost every beginner, so read slowly.

Sita deposits Rs 1,80,000. For Sita, it is an asset, her money. But for the bank, it is a liability, because the bank owes it back to her whenever she asks.

And when the bank gives a loan to someone, that loan is the bank's asset, because someone owes the bank.

Item	Sita's view	Bank's view
Money in her account	Asset	Liability (bank owes her)
Loan taken by Sita	Liability	Asset (she owes bank)

This is why accountants call the bank's balance sheet "mirrored." Keep this table in your head; it will save you in an interview.

A small but important companion: capital or equity. This is the owners' money, mostly from shareholders. Capital is the bank's cushion. If some loans go bad, the loss is first eaten by capital, so depositors like Sita are protected. More capital means a stronger bank. Regulators therefore force every bank to hold a minimum capital. We will study this properly in Post 4.

Nepal's Banking Story in Five Steps

You do not need to memorise dates like a history exam, but knowing the order of events helps you answer "tell me about Nepal's banking history" in an interview.

Step 1 – The first bank (1937). Nepal Bank Limited opened in 1937 (BS 1994), the first bank in Nepal, with government and private ownership. Before this, people depended on moneylenders and rulers' treasuries.

Step 2 – The central bank (1956). Nepal Rastra Bank (NRB) was established in 1956 (BS 2013). It prints currency, runs monetary policy and regulates all banks. Think of NRB as the headmaster of all banks.

Step 3 – Government banks (1960s). Rastriya Banijya Bank (RBB) started in 1966, and the Agricultural Development Bank started in 1968 to push credit to farmers. Along with Nepal Bank, these became the state-owned giants of Nepali banking.

Step 4 – Joint venture banks (1980s). In 1984 Nepal Arab Bank (today's NABIL Bank) opened as a joint venture with foreign partners. It brought modern customer service, computers and credit practices. Standard Chartered and others followed. Slowly, banking became a competitive business.

Step 5 – Liberalisation and boom (1990s onward). Many private commercial banks, development banks and finance companies opened. Then came the opposite problem: too many institutions. NRB raised the minimum capital again and again, which pushed banks to merge and acquire each other. Today there are far fewer banks than before, but each is bigger and stronger. (The exact count keeps changing, so check NRB's latest list.)

Taiyari Tip: Write this list as one line on a card: 1937 Nepal Bank → 1956 NRB → 1966 RBB → 1968 ADB → 1984 first JV bank (Nabil) → liberalisation → mergers. That one line answers a whole interview question.

Who's Who in Nepal's Financial World

For job preparation, you must know who regulates whom. Many candidates mix this up.

1. Nepal Rastra Bank (NRB)
The central bank. It licenses and supervises banks and financial institutions (BFIs), issues currency, manages foreign exchange reserves and sets monetary policy. It acts as banker to the government and banker to banks.

2. The classification of BFIs: A, B, C, D
Under the Bank and Financial Institutions Act, 2073 (BAFIA), licensed institutions are grouped by class:

• Class A – Commercial Banks. The full-service banks: deposits, loans, trade finance, remittance, cards, forex. Examples people know: Nabil, NIC Asia, Global IME, Nepal Bank, Rastriya Banijya Bank and others. They have the highest capital requirement.
• Class B – Development Banks. Smaller, often focused on specific regions or sectors.
• Class C – Finance Companies. Limited services, mostly smaller loans and deposits.
• Class D – Microfinance Institutions. Tiny loans for low-income households, often women and rural families, usually without heavy collateral.

The higher the class, the wider the services and the bigger the capital. As the Nepal system consolidated, many B and C institutions merged upward.

3. Securities Board of Nepal (SEBON)
Regulates the capital market, meaning shares, IPOs and the stock exchange. Banks issue shares to raise capital, so banks and SEBON meet often.

4. Nepal Stock Exchange (NEPSE)
The market where shares of listed banks trade. Bank share prices and "bonus share" news are everyday topics in Nepal.

5. Insurance Authority
Regulates insurance companies. Banks sell insurance products (called bancassurance) but do not regulate insurers.

6. Deposit and Credit Guarantee Fund
Protects small depositors up to a set limit if a BFI fails. The amount is revised from time to time, so check the current figure.

7. Cooperatives
This is a classic trap. Savings and credit cooperatives are not banks and are governed under cooperative laws and a different regulator system, not under the BAFIA class system. Many Nepalis say "bank" for both, but your exam answer must separate them.

Public Bank vs Private Bank

• Government-owned banks (like RBB, Nepal Bank and the Agricultural Development Bank) have the state as majority owner. They have wide branch networks, including remote districts, and recruit through structured open competitions.
• Private commercial banks are owned mainly by shareholders, many of them listed on NEPSE. They compete on technology, service speed and products.

Both follow the same NRB rules. The difference is ownership, culture and recruitment style. If you plan to apply to both, prepare for written exams (public banks) and interview-heavy selection (many private banks).

Inside a Bank: Head Office to Counter

When Sita enters a branch, she sees only a counter and a manager's room. But behind that, a bank is layered:

• Head Office: Board of Directors, CEO, and departments for credit, risk, compliance, treasury, IT, HR, finance, and operations.
• Province / Regional Office: Coordinates a group of branches.
• Branch: Where customers meet the bank. Led by a Branch Manager.
• Extension Counter: A smaller service point attached to a branch.
• ATM and POS network: Cash and payment points outside the branch.
• Branchless Banking / Agent Banking: Small shops that act as mini-bank counters in remote areas.

In a branch, you will usually find these seats:

• Customer Service Representative (CSR): Opens accounts, answers queries.
• Teller (Cashier): Handles cash deposit and withdrawal.
• Operations / Back Office: Checks entries, clearing, remittance and reconciliation.
• Credit Officer / Relationship Manager: Handles loan files and business clients.
• Branch Manager: Responsible for everything: business, risk and compliance.

Term Box: Words You Will Hear on Day One

• Bank – A licensed institution that takes deposits and gives loans. Why this word: The law reserves it for licensed entities, which protects the public from fake "banks."
• BFI – Bank and Financial Institution, the common name for all licensed A, B, C and D class institutions. Why used: NRB needs one short word to give rules to all of them.
• Deposit – Money placed with the bank by customers. Why important: It is the bank's raw material and its biggest liability.
• Liability – What the bank owes others (deposits, borrowings). Why used: Bankers watch it because it must be repaid.
• Asset – What the bank owns or is owed (loans, investments, cash). Why used: This is what earns income.
• Capital / Equity – Owners' money. Why used: It absorbs losses and protects depositors.
• Paid-up capital – The portion of capital that shareholders have actually paid in. Why NRB cares: The regulator sets a minimum paid-up capital to keep only serious players in the market.
• Authorised capital – The maximum capital a company is allowed to raise as per its documents. Why used: It is a legal ceiling, not real money.
• Licence – Permission from NRB to run a bank. Why used: It is the regulator's main control; no licence, no banking.
• Core Banking System (CBS) – The central software that links all branches so your account works in every branch. Why used: Without it, banking would be branch-by-branch and slow.
• Interest spread – Lending rate minus deposit rate. Why used: It tells you how the bank earns.
• Merger and acquisition (M&A) – Combining two or more institutions. Why used in Nepal: To meet higher capital rules and build stronger banks.
• Branch – A bank's service office. Why used: It is the unit through which business and risk are managed locally.

What Jobs Does a Bank Offer?

Before studying deeper, know where you might land. This helps you choose what to study.

• Customer service / front desk: Needs patience, product knowledge and basic KYC understanding.
• Teller / cash: Needs accuracy and honesty above everything.
• Operations: Needs attention to detail, understanding of clearing, remittance and reconciliation.
• Credit / lending: Needs financial analysis, understanding of collateral and risk.
• Remittance and trade finance: Needs knowledge of forex and documents.
• Compliance and AML: Needs knowledge of KYC, reporting and law.
• Risk and internal audit: Needs analytical thinking and strong rule knowledge.
• Treasury: Needs comfort with interest rates and forex.
• IT and digital banking: Needs technical skills, plus awareness of banking processes.
• Management trainee / officer programmes: Broad rotation across departments.

Typical entry levels are assistant, officer and management trainee, with growth to senior officer, assistant manager, manager and beyond. Every bank names levels slightly differently, but the ladder idea is the same.

Taiyari Tip: Your First Week Study Plan

1. Draw the mirror table (asset vs liability) from memory.
2. Learn the A, B, C, D classes and one example of each kind of work.
3. Write the one-line history (1937, 1956, 1966, 1968, 1984).
4. Read the About NRB and Functions of NRB pages on the NRB website.
5. Memorise the 13 terms in the Term Box above.

Interview Corner

Q1. What is a bank, in your own words?
Model answer: "A bank collects savings from people who have extra money and lends it to people who need money, charging more for loans than it pays for deposits. It also gives services like payments, remittance and cards."

Q2. Why is a customer's deposit a liability for the bank?
Model answer: "Because the bank owes that money back to the customer on demand or on maturity. The deposit is the customer's asset but the bank's liability."

Q3. Why does NRB keep raising the minimum capital?
Model answer: "Higher capital means more cushion for losses, a stronger system and safer depositors. It also encourages mergers so that weak, tiny institutions combine into larger and healthier ones."

Q4. Is a cooperative a bank?
Model answer: "No. A cooperative is a member-owned financial society under cooperative law. A bank is a licensed institution under the BAFIA and supervised by NRB."

Quick Recap of Post 1

• A bank buys money (deposits) and sells money (loans). The gap is the spread.
• Deposits are liabilities, loans are assets, capital is the cushion.
• Nepal's banking: Nepal Bank 1937, NRB 1956, RBB 1966, ADB 1968, first JV bank 1984, then liberalisation and mergers.
• NRB regulates BFIs in classes A, B, C and D under the BAFIA; SEBON handles shares; cooperatives are separate.
• A branch has CSR, teller, operations, credit and a manager.

Sita now trusts the bank. In Post 2, she opens accounts, writes her first cheque, and meets the three letters that every banker fears and respects: K-Y-C.

Next in the series: Post 2, Counter Se Core Banking: Accounts, KYC, Cheques, Remittance and Digital Payments

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