Examining The Ramifications Of Increasing Paid-Up Capital For Commercial Banks In Developing Economies: A Case Study Of Nepal
Dr. Maya Shrestha
Department of Economics, Tribhuvan University, Kathmandu, Nepal
Dr. Rajesh Sharma
Department of Economics, Tribhuvan University, Kathmandu, Nepal
Abstract
Commercial banks hold a pivotal role in driving economic growth within developing countries by serving as essential financial intermediaries. In regions where a substantial portion of the population depends on low-wage livelihoods, particularly in traditional agriculture, commercial banks are instrumental in supplying vital capital for infrastructure development and the establishment of new businesses. Term loans serve as a primary mechanism through which these banks channel funds to businesses, but efficient asset management and loan collection pose continuous challenges for commercial banks in developing nations.
This paper focuses on the context of Nepal, tracing the evolution of commercial banking from its inception with Nepal Bank Ltd. in 1937 to the substantial entry of the private sector in the 1990s. Nepal Rastra Bank (NRB) acts as the central bank overseeing monetary policy regulation. As of 2018, Nepal hosted 28 commercial banks, categorized into public sector, joint venture, and domestic private banks. Historically, public sector banks have dominated loan distribution, but their performance has lagged considerably behind joint-venture and domestic private banks, which exhibit similar performance metrics.
This research delves into the dynamics of commercial banking in Nepal, shedding light on the disparities in performance and the implications for economic growth and financial stability in the region