The history of banking in Nepal is believed to be started from the time of Prime Minister Ranoddip Singh in 1877 A.D.

But the real banking started with the esta blishment of Nepal bank limited in 1994 B.S which was founded by Judda Samsher. It was the first bank of Nepal. Its main function was to provide loans and accep t deposits. Later Nepal Rastra Bank was established as a central bank in 2013 B. S. The bank was completely government ownership and it started to issue notes si nce 2016 B.S. Then after, several commercial banks have been established in the recent years. As of mid July 2011, the number of commercial banks reached 31 (cu rrently it counts 32) occupying 51.4 percent of total assets of the financial se ctor. The total asset of commercial banks is Rs. 867 billion which constitutes 6 4.41per cent of the GDP of Rs. 1346 billion. Of the total commercial banks, thre e are state-owned commercial banks, namely Nepal Bank Limited (NBL), Rastriya Ba nijya Bank Limited (RBBL) and Agricultural Development Bank Limited (ADBL). More over, there are 87 development banks and 79 finances. Nepal s banking industries have been subjected to various rules set by NRB and the y must move and make strategic decisions by abiding by those rules. For example: in order to streamline the Nepalese banking industry in a healthy and robust wa y, NRB increased capital requirement for commercial banks to Rs 2 billion which they should meet by 2070. So this new policy encouraged the banks to merge with other banks and financial institutions. As government and the central bank have given high priority to mergers of bank and financial institutions (BFIs), the go vernment has changed the existing provision of taxing assets and liabilities as disposal after mergers, making it non-taxable. Moreover, the central bank is als o mulling facilities to be provided to encourage mergers. Due to this policy and NRB s encouragement in merging, various banks have merged with other (BFIs). A ye ar ago, Nepal Bangladesh Bank merged with Nepal Sri Lanka Merchant bank which he lped NBB to surpass its paid up capital above 2 billion mark. Before merging, NB B had a paid-up capital of Rs 1.86 billion and the paid-up capital of NSLMB was Rs 300 million. Similarly, just few months back, Global bank merged with IME fin ance and Lord Buddha finance and became Global IME. The merging makes the mixes of different corporate cultures. This also changes various processes like hassle free loan dispersion in finances changing to time consuming and nerve wrecking process after merging. Likewise, it affects the salary and other remunerations t o be received by the staffs holding similar positions in two different class ins titutions. For example: senior official at Lord Buddha finance quitted the job w hen he was offered a lower rank position after merging of this finance with Glob al bank and IME finance So, it has become a very challenging task for banks to m anage people, process and customers that underwent merging process which is quit e new to Nepali banking industry. Similarly, NRB required banks to maintain capi tal to loan ratio (capital adequacy) to be 10%, cash reserve ratio to be 6% , di fference of interest rates of lending and deposits to be not more than 2% and so on which has affected various strategies of the banks in Nepal. Nepal s political instability and various bandhs and strikes have led different in vestment sectors like construction, agriculture, manufacturing and hydropower to underperform. As banks have largely invested and given huge loans to such proje cts, their poor performance has increased bank s bad loan which has directly affec ted its profitability. Also, deregulation in banking industry has, to a large ex tent, provided geographical freedom and stiffened the competition in Nepalese ba nking industry. Nepal has high inflation (8% as per 2012) and high unemployment rate (47%). The per capita income of Nepal is $740 (as per 2012) which is less than Rs 5000 a mo nth for an average Nepali citizen. These data shows most of Nepalese have no inc ome source and those who have, also aren t able to save due to high inflation and limited income source. But, on the contrary, Nepal s GDP is increasing (3.5% as pe r 2011) which is largely attributed to the high remittance flow inside the count ry. The remittance inflow in Nepal was $3.5 billion which contributed 23% of tot al country s GDP. Due to this, overall money market in Nepal is high but there are n t major areas/ new projects to invest that money in. So, huge money and lack of investment areas has caused banks to significantly lower interest rate in their borrowing and lending. Standard Chartered bank, for example, is giving 3% intere

st in its fixed deposit which shows the lack of demand for money in Nepali marke t. Also, lack of new investment projects has forced banks to maintain undiversif ied portfolios thereby making them more vulnerable towards higher risks and loss es. Though there had been liquidation of certain BFIs like Nepal Development bank an d Samjhana Finance Company, higher deposits and investment in FDs shows the incr ease of public confidence towards banking industry. The reason might be attribut ed to the downward spiral in real estate and plunging of the Nepali share market in recent years. Another strong reason might be availability of money with publ ic but lack of investment areas. Also, the attitudes against nepotism has increa sed a lot in Banking industry due to fierce competition and the need of skilled manpower for the required job title. Nepalese spending on luxury items have increased significantly as shown by the d ata of number of cars registered in 2012. People are also organizing and going t o parties more often nowadays than they used to. This shows the lack of saving h abit of the people. So, banks are encouraging people in saving that discretionar y income by educating and making them realize the need for saving through advert isements and conducting various seminars. They are motivating everyone to save f rom children ranging from 12 years to the seniormost people by opening various a ccounts for each customer like Bal bachat khata and Grihini bachat khata. The banking industry has undergone significant technological advancement till no w. Some of the services like ATM/debit card which used to be augmented service c ouple of years ago, is now considered as a basic banking service. Nowadays, most of the Nepalese banks use advance data entry system and international accountin g system for efficiency, accuracy and ease of use. They use state of the art IT system to communicate with different branches. Nowadays almost every bank provid es credit card facilities, SMS banking, e- banking which used to be an augmented service few years ago. Due to these technological advancements and facilities p rovided by the banks, customers have benefitted a lot. Today, customers of the b ank can pay their utilities bill online, they can shop online, buy recharge card s and pay their children s school fee within a single click. In conclusion, as the number of BFIs increased, unhealthy practices took certain momentum in banking industry in order to show higher profits in their balance s heet. In spite of this, it is one of the most respected industries in Nepal whic h has contributed a large portion in Nepal s GDP and pays billions of rupees each year as tax. On average, Nepalese banking industry is doing well. Among the 32 c ommercial banks, 22 were able to increase their profit during the last quarter. The 32 class A financial institutions have recorded a net profit worth Rs 15.5 bil lion (2012), which stood at Rs 13.8 billion in the corresponding period of the p revious fiscal year (2011). Banks are also seen to be involved in Corporate Soci al Responsibilities which is certain to help them in maintaining good public rel ation in the society in which they are operating. Brief introduction of Nepal Bangladesh Bank: Nepal Bangladesh Bank Ltd was established in the year 1994 with IFIC Bank Ltd of Bangladesh with the goal to become The Bank for Everyone . Its Head Office is situ ated at New Baneshwor, Bijuli Bazar, Kathmandu. The prime objective of this bank is to render hospitality to the valued customer . With a network of 19 branches and a corporate office, bank has been providing the extensive services to the valued customer. To facilitate the valued customer bank had successfully install 16 ATMs and holiday banking for their convenience . The bank has earned the glory of making available the services for almost all th e top business houses. Top exporter and importers of the country have establishe d banking relationship with the bank with a substantial volume of foreign busine ss which has enhanced the bank s popularity in the international trade font. Some of the strategies pursued by NB Bank and its justification to compete in pr esent banking system are discussed below: 1. New CEO Gyanendra Prasad Dhungana shows optimism and confidence towards

the future of the bank. For example, he says: he is committed to bring back the glory of yesteryears to the bank when the bank had annual profit of Rs 3 billion . This optimism makes favorable environment for the employees and increases publ ic confidence towards the bank which is what is required in today s unhealthy bank ing industry. 2. Setting high goal that is to increase net profit to Rs 800-900 million b y mid July 2013 which will not only recover losses but also help to distribute 1 0-15 % dividend to the shareholders, as said by the CEO reflects the dedication and commitment to achieve the challenging goal. It s a brilliant strategy to motiv ate employees to achieve this hard to achieve goal which is certain to make ever y employees tick. 3. NBB pursued various structural and operational reforms like central bran ch operations which reduced cost and introduced risk management policies as per the lesson learnt from its past to decrease the bad debts /loans and to countera ct with its current bad loans. It has already generated 400 million profits this year from the recovery of such loans alone. 4. NBB just merged with Nepal Sri Lanka Merchant Bank a year ago. Following the NBL-NSLMB merger, the paid-up capital of NBB surpassed Rs 2 billion mark, a requirement which banks should meet by fiscal year 2012-13. This is a great str ategy pursued by the bank to cope up with the new NRB policy. A year ago, NBB ha d a paid-up capital of Rs 1.86 billion and the paid-up capital of NSLMB was Rs 3 00 million. 5. The bank anticipates the need of new product development and market deve lopment apart from the mere traditional deposits and lending. So it is thinking of developing new products and markets as it is the first bank to launch the spe cial deposit product for women introducing Grihini Bachat Khata . This is needed fo r the sustainability of the bank in the future. 6. NBB has quite a diversified investment portfolio. It has invested around 25% of its total portfolio in the construction sector while its investment in m anufacturing sector hovers around 17%. The bank s planning to enter further more i nto medical education and tourism is the new strategy to diversify its investmen t portfolio even more, which reduces the risk of loss. The history has shown the plunging of some banks into heavy loss as they maintained very limited portfoli os and invested heavily into real estate business. And as NB Bank has planned to maintain diversified portfolio, the loss of one investment project will be cove red up by other unrelated investment projects. 7. As Dhungana said, the bank s organizational structure is flat at the botto m with just three senior level managers on top and quite a big middle level mana gement. He intends not to lay off employees and create a chaos and unfavorable w orking environment but to re structure and make these employees work in a new br anch after branch expansion without the need of recruiting and training employee s thereby reducing HR related costs. 8. The bank is also involved in Corporate Social Responsibilities (CSR) as it has donated wheel chairs and computers to the orphanages this year. And next year too, the bank is keen to involve in such activities from the profit made in this year which is required to maintain good image and positive public attitude toward the bank, to get public support and for the sustainable growth and devel opment of the bank.