Banking Systems and Monetary Policy For NEB Students of Economics of Grade 12

Banking Systems and Monetary Policy in Macro Economics

1. Central Bank (सेंट्रल बैंक)

Features and Functions:

Monetary Authority: The central bank controls and regulates the money supply and interest rates in the economy.
Currency Issuer: It is the sole authority to issue national currency (e.g., Nepal Rastra Bank in Nepal).
Regulation of Commercial Banks: It oversees and regulates commercial banks, ensuring they adhere to financial rules and regulations.
Bank for the Government: It acts as a banker to the government, managing its accounts and facilitating payments.
Control of Inflation and Deflation: By adjusting interest rates and implementing monetary policy tools, it manages inflation and deflation.
Lender of Last Resort: It provides emergency funds to commercial banks in financial distress to prevent systemic failures.
Examples: Nepal Rastra Bank (NRB), Reserve Bank of India (RBI), Federal Reserve System (USA).

2. Commercial Banks (व्यावसायिक बैंक)

Features and Functions:

Accept Deposits: Commercial banks accept deposits from individuals and businesses.
Provide Loans: They provide short-term and long-term loans to individuals and businesses for various purposes like buying homes, cars, and funding business operations.
Payment Services: Banks facilitate payments through checks, cards, and online transfers.
Profit Motive: Commercial banks operate for profit by charging interest on loans and offering lower rates for deposits.
Examples: Himalayan Bank, Standard Chartered Bank, HDFC Bank.

3. Financial Markets (आर्थिक बजार)

Financial markets are where financial assets are bought and sold. They play a critical role in the economy by channeling funds from savers to borrowers.

a. Capital Market (पुँजी बजार)

Features:

Long-Term Investments: The capital market deals with the buying and selling of long-term securities, such as stocks and bonds.
Instruments: It includes equity shares, debentures, and bonds.
Participants: Investors, companies, and government agencies.
Examples: Nepal Stock Exchange (NEPSE), Bombay Stock Exchange (BSE), New York Stock Exchange (NYSE).

b. Money Market (पैसा बजार)

Features:

Short-Term Borrowing and Lending: The money market deals with short-term borrowing and lending, usually with instruments that have maturities of less than a year.
Instruments: Treasury bills, certificates of deposit, commercial papers, and repurchase agreements.
Participants: Commercial banks, central banks, and financial institutions.
Examples: Repo market, interbank lending, and government treasury bills.

Differences between Capital Market and Money Market:

Capital Market	Money Market
Deals with long-term securities.	Deals with short-term securities.
Example: Stocks and bonds.	Example: Treasury bills and commercial papers.
Aims to provide long-term funding.	Aims to provide liquidity in the short term.
Higher risk and returns.	Lower risk and returns.

4. Development Banks (विकास बैंक)

Features and Functions:

Focus on Economic Development: These banks focus on providing long-term loans for projects that support the overall economic development of the country.
Targeted Borrowers: They usually lend to industries, infrastructure projects, and small businesses.
Examples: Nepal Industrial Development Corporation (NIDC), Asian Infrastructure Investment Bank (AIIB).

5. Cooperatives (सहकारी संस्था)

Features and Functions:

Owned by Members: Cooperatives are owned and managed by their members who contribute capital and share the profits.
Promote Savings and Credit: They provide financial services to their members, especially in rural areas.
Community Development: Focus on improving the social and economic conditions of their members.
Examples: Agricultural cooperatives, credit unions.

6. Trust (ट्रस्ट)

Features and Functions:

Assets Management: A trust involves the management of assets for the benefit of others by a trustee.
Philanthropic and Charitable Purposes: Trusts are often set up for charitable purposes or for the benefit of specific beneficiaries.
Examples: Charitable trusts, family trusts.

Monetary Policy (मौद्रिक नीति)

Monetary Policy refers to the actions taken by the central bank to control the money supply and interest rates to achieve economic objectives like controlling inflation, maintaining employment, and stabilizing the currency.

Types of Monetary Policy:

Expansionary Monetary Policy: This involves lowering interest rates and increasing the money supply to stimulate economic activity during a recession.
- Example: Reducing the policy rate to encourage borrowing.
Contractionary Monetary Policy: This involves raising interest rates and reducing the money supply to control inflation.
- Example: Increasing the interest rates to cool down an overheating economy.

Functions of Monetary Policy:

Control Inflation: By regulating interest rates and the money supply, the central bank can control inflation.
Stabilize Currency: By adjusting interest rates, the central bank helps stabilize the exchange rate.
Ensure Economic Growth: It supports economic growth by controlling the money supply and ensuring that the economy doesn't overheat or fall into recession.

Conclusion

The banking system and monetary policy play a crucial role in managing a country's economic health. Central banks guide monetary policy, while commercial banks facilitate day-to-day financial operations. Development banks and cooperatives focus on long-term growth and social welfare. The financial markets support capital flow, and trust institutions help manage assets and wealth. Each of these components has distinct but interconnected roles in ensuring a stable and growing economy.

बैंकिङ प्रणाली र मौद्रिक नीति

बैंकिङ प्रणाली र मौद्रिक नीति को मुख्य उद्देश्य अर्थतन्त्रको स्थिरता र विकासको सुनिश्चितता हो। बैंकिङ प्रणालीले मुद्रा प्रवाह र ऋण प्रवाहमा व्यवस्थापन गर्नका लागि विभिन्न प्रकारका संस्थाहरूको कार्य गर्दछ।

१. सेंट्रल बैंक (Central Bank)

विशेषताहरू र कार्यहरू:

मुद्रास्फीति नियन्त्रण: सेंट्रल बैंकले अर्थतन्त्रमा मुद्रा आपूर्ति र ब्याज दरहरू नियन्त्रण गर्छ।
सिक्का जारीकर्ता: यसले राष्ट्रिय मुद्रा जारी गर्ने एकमात्र अधिकार प्राप्त गर्दछ।
व्यावसायिक बैंकहरूको नियन्त्रण: यो व्यावसायिक बैंकहरूको निगरानी र नियन्त्रण गर्छ।
सरकारको बैंक: सेंट्रल बैंकले सरकारको खाता व्यवस्थापन गर्छ र तिर्ने प्रक्रिया सहजीकरण गर्दछ।
सञ्चालनको लाजिस्टिक्स: यसले सबै प्रकारको आर्थिक घटनाहरूका लागि अन्तिम ऋणदाता को रूपमा काम गर्दछ।

२. व्यावसायिक बैंक (Commercial Bank)

विशेषताहरू र कार्यहरू:

जमा लिन्छ: यसले व्यक्तिहरू र संस्थाहरूबाट जम्मा स्वीकार्छ।
ऋण दिन्छ: यसले व्यक्तिगत र व्यवसायिक ऋण प्रदान गर्छ।
भुक्तानी सेवा: चेक, कार्ड, अनलाइन ट्रान्सफर जस्ता भुक्तानी सेवा उपलब्ध गराउँछ।

३. आर्थिक बजार (Financial Market)

पुँजी बजार र पैसा बजार मा विभिन्न प्रकारका वित्तीय साधनहरूको व्यापार हुन्छ।

४. विकास बैंक (Development Bank)

विशेषताहरू र कार्यहरू:

आर्थिक विकासमा ध्यान दिन्छ।
दीर्घकालीन ऋणको प्रवाह।

५. सहकारी संस्था (Cooperatives)

विशेषताहरू र कार्यहरू:

सदस्यहरू द्वारा स्वामित्व।
सञ्चय र ऋणको प्रोत्साहन।

६. ट्रस्ट (Trust)

विशेषताहरू र कार्यहरू:

संपत्ति व्यवस्थापन।
धार्मिक र च्यारिटेबल उद्देश्य।

मौद्रिक नीति (Monetary Policy)

मौद्रिक नीति, अर्थतन्त्रमा मुद्रास्फीति नियन्त्रण, रोजगारको अवस्था र विदेशी मुद्रा दरको स्थिरता बनाए राख्नको लागि सेंट्रल बैंक द्वारा अपनाइन्छ।

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