FINANCIAL SECTOR REFORMS IN NEPAL

Jamuna kumari shrestha

1. Introduction
Financial sector reforms refers to the macro economic sector .it is an integral
component of macro economic reforms accompained by legal reforms that
improve the growth prospects of a country .

It is the re-adjusting or re-assuring the sound financial system, that enhance

efficiency and allocation of opportunities and resources .it is the movement
towards privatization and liberlization where market forces lead and economy .In
this regard ,financial sector reforms mean policy liberlization to put private sector
in a position to decide about credit allocation and it's price rather than by the
Government .Financial liberlization includes;interest rate liberlization ,elimination
of credit ceiling ,easing entry barrier for forign financial institutions ;development
of capital markets with enhanced prudential regulation and supervision .The role
of Government in financial reform is to work as a regulator
,motivator,facilitator,and defense.

A well functioning financial system plays a vital role in the economic development
by efficiently mobilizing resources and allocating capital for productive sectors.
Financial sector is the backbone of the economy ,thus this sector has to be
competitive,broad based and within the range of customers outreach and
affordability for the general public .Financial arrangements can change the
incentives and constraints of economic agent and it has influence on saving and
investment decisions, technological innovation , hence long run economic
growth .It contributes to promote transparency and accountability ,dropping
adverse selection and moral hazard while alleviating liquidity problems in financial
markets.

2. Financial sector history

The financial sector started since,1937,when Nepal Bank Limited country's first
bank, was opened .The financial sector regulations and supervison