Organization Structure, Functions, Duties and Power of Nepal Rastra Bank

 

Nepal Rastra Bank

Nepal Rastra Bank (NRB), the Central Bank of Nepal, was established in 1956 under the Nepal Rastra Bank Act, 1955, to discharge the central banking responsibilities including guiding the development of the embryonic domestic financial sector. Since inception, there has been a significant growth in both the number and the activities of the domestic financial institutions.

The Bank is eminently aware that, for the achievement of the above objectives in the present dynamic environment, sustained progress and continued reform of the financial sector is of utmost importance. Continuously aware of this great responsibility, NRB is seriously pursuing various policies, strategies and actions, all of which are conveyed in the annual report on monetary policy.

Vision of NRB

To become " A modern, dynamic, credible and effective Central Bank"

Mission of NRB

To maintain macro-economic stability through sound and effective monetary, foreign exchange and financial sector policies.

Board of Direcors'

As per section 14 of Nepal Rastra Bank Act, 2002, the Board of Nepal Rastra Bank (NRB) comprises of seven members: four ex officio members - the Governor (who is the Chairman), the Secretary, Ministry of Finance, two Deputy Governors, and three other Directors, who are appointed from amongst the persons renowned in the field of Economics, Monetary, Banking, Finance and Commercial Laws.

The Governor, Deputy Governors and other Directors are appointed by Government of Nepal, Council of Ministers for term of five years. Government may, reappoint the retiring Governor for another one term and the retiring other Directors for any term, if it is deemed necessary.

Departments, Divisions and Units in NRB

Departments in NRB

• Research Department
• Banks and Financial Inst. Regulation Dept Foreign Exchange Management Department
• Currency Management Department Financial Management Department
• Human Resources Management Department
• Internal Audit Department
• General Services Department Public Debt Management Department
• Micro-Finance Promotion & Supervision Department Bank Supervision Department
• Development Bank Supervision Department
• Finance Company Supervision Department
• Information Technology Department Corporate Planning Department
• Payment Systems Department

Department Level Offices

• Banking Office, Thapathali
• Office of the Governor

Divisions

• Legal Division
• Problem Bank Resolution Division

Units

• Financial Information Unit

District Offices

• Nepal Rastra Bank, Biratnagar
• Nepal Rastra Bank, Janakpur
• Nepal Rastra Bank, Birgunj
• Nepal Rastra Bank, Pokhara
• Nepal Rastra Bank, Siddharthanagar
• Nepal Rastra Bank, Nepalgunj
• Nepal Rastra Bank, Dhangadhi

Objectives of Nepal Rastra Bank The objectives of Nepal Rastra Bank are as follows:

• To formulate necessary monetary and foreign exchange policies in order to maintain the stability of price and balance of payment for sustainable development of economy, and manage it;
• To promote stability and liquidity required in banking and financial sector; 
• To develop a secure, healthy and efficient system of payment;
• co-operation in the implementation of the economic policies of Government of Nepal

Functions, Duties and Powers of the Bank

• To issue bank notes and coins;
• To formulate necessary monetary policies in order to maintain price stability and to implement or cause to implement them; 
• To formulate foreign exchange policies and to implement or cause to implement them;
• To determine the system of foreign exchange rate;
• To manage and operate foreign exchange reserve;
• To issue license to commercial banks and financial institutions to carry on banking and financial business and to regulate, inspect, supervise and monitor such transactions;
• To act as a banker, advisor and financial agent of Government of Nepal; 
• To act as the banker of commercial banks and financial institutions and to function as the lender of the last resort; 
• To establish and promote the system of payment, clearing and settlement and to regulate these activities;
• To operate open market transaction through necessary instruments for liquidity management, and
• To implement or cause to implement any other necessary functions which the Bank has to carry out in order to achieve the objectives of the Bank under this Act;

Functions not to be Carried out by Nepal Rastra Bank 

• Providing any loan, accepting any type of deposit or making any type of financial gift;
• Purchasing shares of any commercial bank, financial institution, public corporation or a company or acquiring any type of proprietary right in any financial, commercial, agricultural, industrial or other institution;
• Carrying out any type trade; and Acquiring right over movable and immovable property by way of purchase, lease or in any manner whatsoever. 
• Provided that the Bank may acquire such property as required for carrying out its function or for achieving its objectives.

Privileges and Facilities to Nepal Rastra Bank:

• Exemption from all types of taxes, fees and charges on the incomes, capital houses, land, assets etc.; transactions,
• No requirement for the payment of registration fee for registration of the deeds of loan or refinance to be given by the Bank;
• No requirement of revenue stamps on any of the documents relating to the Bank; There would be no tax, fee, charge, duty on the export and import of bank notes, coins, gold, silver and the paper, metal, chemicals, and other materials to be used for printing bank notes and minting coins.

Formation of the Board

• Board of Directors of Nepal Rastra Bank consisting of the following members: Governor -Chairperson
• Secretary, Ministry of Finance -Member Two Deputy Governors -Member
• Three Directors appointed by the Government of Nepal from amongst the persons renowned in the fields of Economic, Monitory, Banking, Finance and Commercial Law -Member

Procedure of Appointment of the Governor:

• Government of Nepal, the Council of Ministers shall appoint Governor on the basis of the recommendation of the Recommendation Committee
• Government of Nepal, the Council of Ministers shall, for the appointment of Governor, form a Recommendation Committee as follows:

1. Minister of Finance -Chairperson
2. One person from among the former Governors - Member
3. One person designated by Government of Nepal from amongst the persons renowned in the fields of Economic, Monitory, Banking, Finance and Commercial Law. -Member

• While making recommendation for the appointment of Governor, the committee formed shall recommend to Government of Nepal, the Council of Ministers the names of three persons renowned in the field of economic, monetary, banking, finance, commerce, management, commercial law and from among the Deputy Governors.
• Government of Nepal, the Council of Ministers shall, out of the names recommended by the committee, appoint one person to the Office of Governor.

Appointment of the Deputy Governor: 

• Government of Nepal, the Council of Ministers shall, on the recommendation of the Governor, appoint Deputy Governor.
• The Governor shall, while making recommendation for appointment of Deputy, recommend names, double in number of the post falling vacant from among the special class officers of the Bank on the basis of their performance and capability.
• Person appointed in the post of Deputy Governor under this Section shall be deemed to have been automatically retired from the service of the Bank.

Appointment of the Directors:

Government of Nepal, the Council of Ministers shall appoint Directors. Government of Nepal, the Council of Ministers shall, while appointing Directors, appoint them each representing different sectors from amongst the persons renowned in economic, monetary, banking, financial, commercial, management and commercial law sectors.

Qualifications of the Directors

In order to be appointed to the post of Governor, Deputy Governor and Directors, a person shall have to meet the following qualifications:

(a) A Nepalese citizen;

(b) Having higher moral character;

(c) Having work experience in economic, monetary, banking, financial and commercial law sectors after having attained at least master's degree in economics, monetary, banking, finance, commerce, management, public administration, statistics, mathematics and law. Explanation:- For the purpose of this Clause; "work experience" means the experience of works in the post of special class of Government of Nepal or of the Bank or in the post of a university Professor or in the post of Executive Chief of class 'A' of a commercial bank or of a financial institution or in the equivalent post or in the post higher than those in terms of the order of protocol.

(d) Not disqualified under Section 21 of the Act.

Disqualification of the Directors None of the following persons shall be eligible for appointment to the Office of the Governor,

Deputy Governor and Director: 

(a) Member or official of a political party, or

(b) The person blacklisted in relation to transaction with a commercial bank or financial institution, or

(c) An official currently engaged in any commercial bank or financial institution, or 

(d) A person having five percent or more shares or voting right in a Commercial Bank or financial institution, or 

(e) A person rendered bankrupt for being unable to pay debts to creditors, or

(f) A insane person, or 

(g) A person convicted by a court in an offence involving moral turpitude.

Grounds for Removable of the Directors from Office.

(1) Government of Nepal, the Council of Ministers shall remove the Governor, Deputy Governor and Director on conditions stipulated under Sub-section (5). Provided that Government of Nepal shall not deprive the concerned person from a reasonable opportunity to defend himself/herself prior to remove him/her from his/her office.

(2) Government of Nepal shall, remove the Governor from his office pursuant to Sub-section (1), on the recommendation of an inquiry committee constituted under Section 23.

(3) While removing a Director or Deputy Governor pursuant to Subsection (1), Government of Nepal shall cause to conduct an inquiry by committee and remove him/her from the office on the basis of the recommendation made by the committee.

(4) Once Government of Nepal initiates the process for removing the Governor, Deputy Governor and Director pursuant to Sub-section (1), they shall be deemed to have been ipso facto suspended from the office.

(5) The Governor, Deputy Governor and Director shall be removed from the office on any of the following grounds:

(a) If one is disqualified to become a Director pursuant to Section 21; or

(b) The lack of capability to implement or cause to implement the functions which the Bank has to carry out in order to achieve the objectives of the Bank under this Act; or 

(c) If one has committed any act causing loss and damage to the banking and financial system of the country; or

(d) If one is found to have acted dishonestly or with mala fide intention in any transaction related to the business of the Bank; or 

(e) If professional license is revoked or prohibited from carrying out any profession - rendering disqualified to be engaged in any trade or profession on the ground of gross misconduct; or

(f) If one is absent for more than three consecutive meeting of Board without a genuine reason;

(6) Except on the grounds referred to in Sub-section (5), no Governor, Deputy Governor and Director shall be removed from office.