CHAPTER 1
INTRODUCTION
Background of the Study
Bank is a financial institution, which is engaged in monetary transactions which has
intermediaries. Banks collects the
always been the most important and largest finai
scattered money from the public providing those interests and services. This collection
becomes the capital for the bank to invest. The bank operates its performance after
receiving deposits from the public. Banking services for customers such as collect
of deposits, distribution of credits and provision of financial services are of particular
importance. Various thinker and economists have forwarded different ideas regarding
the origin of banks.
According to Fama (1980) “Banks are financial intermediaries that issue deposits and
use the proceeds to purchase securities.”
"A Bank is an organization whose principal operations are concemed with the
accumulation of the temporarily idle money of the general public for the purpose of
advancing to other for expenditure” (Dahal, 2002).
In Nepal, the history of development of commercial bank is not very long as compared
to other developed countries. Nepal Bank Limited is first commercial bank which was
established in 1994 B.S.
Banks also involves a number of agency services like remitting and collection each
other on behalf of its client, opening bank draft and exchanging currencies. The bank
generates profits from the difference in interest rates charged and paid. The main
function of commercial bank is to receive deposits from the people and to lend it to
those who are in need of financial aid. Thus commercial banks are the institutions which
receive the saving from the people in different account by paying some rate of interest.
‘Therefore, commercial bank draws surplus money from the people who do not use it at
the time and lend it to those who are in the position to use it for productive purposes.
In other words bank are the creators of the money but they do not have their own money.
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