Nepal Rastra bank is the Central Bank of Nepal. It was established on 14tth Baisakh, 2013 under Nepal Rastra bank Act 2012. It is the apex bank of Nepal. It is owned and managed by the government of Nepal. It is established for controlling all the financial sectors, commercial banks and to implement the economic policies of the government of Nepal. Nepal Rastra Bank is the Central arch of the monetary and fiscal operations of the government of Nepal, it performs the function like developing banking system, issue paper notes and coins, controlling of credit, exchanging of foreign currency and acts as the bank of the government.

Functions of Nepal Rastra Bank 

:- The main functions of Nepal Rastra bank are:

a) Issue of currency notes:- Issue of the currency notes of a country is one of the most fundamental functions of the central bank. The central bank is empowered by law to issue currency notes. Nepal Rastra Bank, the Central Bank of Nepal is the only authorized bank to issue notes. The central bank issues notes with the permission of the government. The central bank is required by law to keep gold, silver, foreign currency, foreign securities, foreign bill of exchange, and Nepali coins of at least 50% of the total amount of notes to be issued as reserve. If the issued notes circulated are not accepted in the market, the government will be responsible.

b) Bank of government:- Central bank acts as a fiscal agent, banker and advisor on all important financial matters to the government. As a banker of the government, it keeps the deposits of the government and makes the payments on behalf of government. It buys and sells foreign currencies on behalf of the government. It keeps the stock of gold of the government. Thus, it is the custodian of government money and property. It provides required loan to the government. It also advises the government on economic and money matters such as controlling of inflation, devaluation and revaluation of currency, deficit financing, balance of payments etc.

c) Bank of banks:- Other banks are established with prior permission of the central bank. Determining the requirements of types of banks, controlling the banks is the sole authority of central bank. While determining the rate of interest, collecting deposits from people and providing banking services to the people, the other banks have to follow the orders and suggestions of the central bank. The central bank acts as the custodian of the cash reserves of commercial banks.

d) Management and control of foreign currency:- It is the only bank which performs the functions of management and control of foreign currencies. It performs the functions of exchanging local currency with foreign currency at the rate determined by the government. It authorises the commercial banks to perform the exchange functions of foreign currency

e) Development of banking system:- The main task of the central bank in underdeveloped countries is to bring about rapid expansion of banking facilities. It helps other banks by granting loans and control them by increasing the reserve ratio. In order to develop the banking system, it gives necessary instructions to other banks to open branches in different places of the country. It inspects the other banks from time to time and guides them. It helps other banks by giving technical advices.

f) Mobilization of saving and capital:- The central bank has the full authority to mobilize the accumulated capital in different productive and profitable sectors of the country. It gives necessary instructions to commercial banks to accept deposits from the public and invest in developmental projects. It also sells government securities bonds and treasury bills.

g) Creation of credit and control:- The central bank formulates and administers monetary policy and regulates the volume and flow of the credit created by the commercial banks. It operates general credit control measures through changing the bank rate or through open market. The central bank keeps a close watch of the money market and adopts method to expand or contrast the volume of credit according to the requirements of trade.

h) Other functions:- Besides the above functions, it performs other functions like giving loan to other banks against securities, opening bank accounts with the foreign banks, becoming the member of IMF, giving training for the development banking system, providing overdraft facility to other banks and transferring government funds from one place to another etc.