Note of Chapter 2: Functions of Banking (Cursory Notes).
Chapter 2: Functions of Banking.
Function of Banking: Section 49 BAFIA.
Note: this table incorporate information only provided in Section 49 of BAFIA.
| Transactions | Class A Banks | Class B Banks | Class C Banks | Class D Banks |
| Deposit mobilization and payments | Can accept deposits and mobilize them through various financial instruments and make payments with or without interest | Can accept deposits and make payments with or without interest | Can accept deposits and make payments with or without interest | Can accept deposits and make payments with or without interest, but subject to the approval of the Rastra Bank |
| Electronic transactions | Can accept deposits, make payments, have transactions, carry on intermediary services, and transfer funds through various electronic means | Can accept deposits, make payments, have transactions, and transfer funds through various electronic means | Can accept deposits, make payments, have transactions, and transfer funds through various electronic means | Limited capability, subject to the Rastra Bank's approval |
| Lending loans (various types) | Can lend various types of loans including hire-purchase, leasing, housing, overdrafts, and project loans | Can lend loans including project loans and consortium financing in collaboration with other banks | Can lend loans including hire-purchase, leasing, housing loans, and consortium financing | Can disburse micro-credits with or without collateral for specific projects or groups as prescribed by the Rastra Bank |
| Loans on collateral and remortgage | Can lend loans on collateral of projects and hypothecation and can also lend loans on remortgage of already mortgaged assets | Can lend loans on collateral of projects and participate in consortium financing | Can lend loans on collateral of projects, participate in consortium financing, and lend loans on remortgage | Limited to micro-credits and subject to specific conditions |
| Foreign bank guarantees | Can lend loans on the guarantee of foreign banks or financial institutions | Not applicable | Not applicable | Not applicable |
| Issuing guarantees | Can issue guarantees on behalf of customers and require necessary bonds, security, and collateral | Can issue guarantees on behalf of customers and require necessary bonds, security, and collateral | Can issue guarantees on behalf of customers and require necessary bonds, security, and collateral | Can issue guarantees for micro-credits |
| Refinancing from Rastra Bank | Can obtain refinance from the Rastra Bank as necessary | Can obtain refinance from the Rastra Bank as necessary | Can obtain refinance from the Rastra Bank as necessary | Not applicable |
| Government loans and foreign agency loans | Can manage loans from the Government of Nepal or other native or foreign agencies for project promotion | Can manage loans from the Government of Nepal or other native or foreign agencies for project promotion | Can manage loans from the Government of Nepal or other native or foreign agencies for project promotion | Can accept loans or grants from native or foreign organizations for micro-credit supply, subject to Rastra Bank approval |
| Credit write-offs | Can write off credits subject to prevailing credit write-off bylaws | Can write off credits subject to prevailing credit write-off bylaws | Can write off credits subject to prevailing credit write-off bylaws | Not applicable |
| Issuing shares, debentures, etc. | Can issue shares, debentures, bonds, etc. to meet capital fund requirements | Can issue shares, debentures, bonds, etc. to meet capital fund requirements | Can issue shares, debentures, bonds, etc. to meet capital fund requirements | Can issue shares, debentures, bonds, etc. to meet capital fund requirements |
| Letters of credit and bills of exchange | Can issue, accept, pay, discount, or purchase and sell letters of credit, bills of exchange, promissory notes, cheques, and other instruments | Can issue, accept, pay, discount, or purchase and sell bills of exchange, promissory notes, cheques, and other instruments | Can issue, accept, pay, discount, or purchase and sell bills of exchange, promissory notes, cheques, and other instruments | Not applicable |
| Digital card issuance and management | Can issue, accept, and manage digital cards or other instruments for electronic transactions | applicable | ATM cards | ATM Cards |
| Foreign exchange business | Can carry on foreign exchange business subject to prevailing laws | Can carry on foreign exchange business subject to prevailing laws | Can carry on foreign exchange business with approval from the Rastra Bank | Not applicable |
| Government transactions | Can carry on government transactions subject to Rastra Bank limits, terms, and conditions | Not applicable | Not applicable | Not applicable |
| Treasury bills and bonds | Can purchase, sell, or accept treasury bills issued by the Government of Nepal or bonds issued by the Rastra Bank | Can purchase, sell, or accept treasury bills issued by the Government of Nepal or bonds issued by the Rastra Bank | Can purchase, sell, or accept treasury bills issued by the Government of Nepal or bonds issued by the Rastra Bank | Not applicable |
| Remittance transactions | Can remit or transmit amounts to different places within or outside Nepal through various financial instruments, and receive remittances from abroad | Can remit or transmit amounts to different places within Nepal through various financial instruments, and receive remittances from abroad | Can remit or transmit amounts to different places within Nepal through various financial instruments, and receive remittances from abroad | Limited capability, subject to Rastra Bank approval |
| Safe deposit vaults | Can take responsibility for and arrange the sale or purchase of shares, debentures, or securities and provide safe deposit vaults | Can take responsibility for and arrange the sale or purchase of shares, debentures, or securities and provide safe deposit vaults | Not applicable | Not applicable |
| Off-balance sheet transactions | Can carry on off-balance sheet transactions | Can carry on off-balance sheet transactions | Can carry on off-balance sheet transactions | Not applicable |
| Loans for economic upliftment | Can disburse credits for economic upliftment of deprived sectors, low-income families, natural calamity victims, etc., as prescribed by Rastra Bank | Can disburse credits for economic upliftment of deprived sectors, low-income families, natural calamity victims, etc., as prescribed by Rastra Bank | Can disburse credits for economic upliftment of deprived sectors, low-income families, natural calamity victims, etc., as prescribed by Rastra Bank | Can disburse micro-credits for economic upliftment of specific groups or projects as prescribed by Rastra Bank |
| Exchange of debtor/customer information | Can exchange details, information, or notices on debtors or customers who have obtained credits from it or other banks with Rastra Bank | Can exchange details, information, or notices on debtors or customers who have obtained credits from it or other banks with Rastra Bank | Can exchange details, information, or notices on debtors or customers who have obtained credits from it or other banks with Rastra Bank | Can exchange details, information, or notices on debtors or customers who have obtained credits from it or other banks with Rastra Bank |
| Buying and selling gold and silver bullions | Can buy and sell gold and silver bullions | Not applicable | Not applicable | Not applicable |
| Project-related study, research, and training | Can conduct or cause to be conducted study, research, and survey work related to projects, and provide training and consultancy services | Can conduct or cause to be conducted study, research, and survey work related to projects, and provide training and consultancy services | Can conduct or cause to be conducted study, research, and survey work related to projects, and provide training and consultancy services | Can conduct or cause to be conducted study, research, and survey work related to micro-finance projects, and provide related training and consultancy services |
| Asset management and sale | Can manage, sell, rent, or lease its assets properly | Can manage, sell, rent, or lease its assets properly | Can manage, sell, rent, or lease its assets properly | Can manage, sell, rent, or lease its assets properly |
| Performance guarantees for third parties | Can give guarantees with consent of the parties involved on matters of payment or values to be recovered for performance between two or more persons | Not applicable | Not applicable | Not applicable |
| Micro-credit disbursement | Not applicable | Not applicable | Not applicable | Can disburse micro-credits with or without collateral for operating any prescribed micro-enterprise |
| Leasing finance | Not applicable | Not applicable | Can provide leasing finance for vehicles, machinery, tools, equipment, and other movable assets | Not applicable |
| Loans on individual or collective guarantee | Can disburse credits against individual or collective guarantees | Can disburse credits against individual or collective guarantees | Can disburse credits against individual or collective guarantees | Can disburse micro-credits against individual or collective guarantees |
