{"id":37537,"date":"2026-08-26T17:47:38","date_gmt":"2026-08-26T12:02:38","guid":{"rendered":"https:\/\/bankingsansar.com\/news\/37537\/"},"modified":"2026-08-26T17:50:08","modified_gmt":"2026-08-26T12:05:08","slug":"what-are-the-functions-objectives-and-duties-of-the-central-bank-nrb-rbb-level-3-2069-2","status":"publish","type":"post","link":"https:\/\/english.bankingsansar.com\/news\/37537\/","title":{"rendered":"What are the functions, objectives and duties of the central Bank (NRB) ? (RBB level 3  2069)"},"content":{"rendered":"<p><strong>Functions, Objectives and Duties of Nepal Rastra Bank (NRB)<\/strong><\/p>\n<ol>\n<li><strong> Introduction<\/strong><\/li>\n<\/ol>\n<p>Nepal Rastra Bank (NRB) is the central bank of Nepal. It was established on April 26, 1956, under the Nepal Rastra Bank Act, 1955. The current principal legal framework is the Nepal Rastra Bank Act, 2058 (2002).<\/p>\n<p>As the central bank, NRB is different from commercial banks. A commercial bank mainly accepts deposits and provides loans to customers, whereas NRB is responsible for monetary policy, foreign exchange policy, banking regulation and supervision, financial stability, currency management, payment systems and important banking services for the government and financial institutions.<\/p>\n<p>The Nepal Rastra Bank Act specifically sets out the Bank&#8217;s objectives in Section 4 and its functions, duties and powers in Section 5.<\/p>\n<ol start=\"2\">\n<li><strong> Objectives of Nepal Rastra Bank<\/strong><\/li>\n<\/ol>\n<p>Under Section 4 of the Nepal Rastra Bank Act, the major objectives of NRB can be grouped into three broad areas.<\/p>\n<p><strong>Objective 1: Maintain Price and External-Sector Stability<\/strong><\/p>\n<p>NRB formulates and manages <strong>monetary and foreign-exchange policies<\/strong> to maintain:<\/p>\n<ul>\n<li>Price stability<\/li>\n<li>Balance-of-payments stability<\/li>\n<li>Overall economic stability<\/li>\n<li>Conditions for sustainable economic development<\/li>\n<\/ul>\n<p><strong>What does price stability mean?<\/strong><\/p>\n<p>Price stability means avoiding excessive and persistent inflation or deflation.<\/p>\n<p>For example, if prices rise very rapidly, the purchasing power of money falls. NRB can use monetary-policy measures affecting interest rates, credit and liquidity to address inflationary pressures arising from demand conditions.<\/p>\n<p><strong>What is balance-of-payments stability?<\/strong><\/p>\n<p>It means maintaining a sustainable external position in Nepal&#8217;s transactions with the rest of the world.<\/p>\n<p>NRB therefore monitors:<\/p>\n<ul>\n<li>Imports<\/li>\n<li>Exports<\/li>\n<li>Remittances<\/li>\n<li>Tourism income<\/li>\n<li>Foreign investment<\/li>\n<li>External payments<\/li>\n<li>Foreign exchange reserves<\/li>\n<\/ul>\n<ol start=\"3\">\n<li><strong> Objective 2: Maintain Banking and Financial-Sector Stability<\/strong><\/li>\n<\/ol>\n<p>NRB aims to maintain a stable banking and financial system and increase public confidence in that system.<\/p>\n<p>It also seeks to broaden people&#8217;s access to financial services.<\/p>\n<p>This objective is achieved through:<\/p>\n<ul>\n<li>Licensing banks and financial institutions<\/li>\n<li>Regulation<\/li>\n<li>Supervision<\/li>\n<li>Monitoring<\/li>\n<li>Prudential requirements<\/li>\n<li>Risk management requirements<\/li>\n<li>Corporate-governance standards<\/li>\n<li>Financial-consumer protection<\/li>\n<\/ul>\n<p>NRB explains that its regulatory function includes issuing necessary directions to financial institutions to protect depositors and stakeholders and maintain financial-sector stability.<\/p>\n<ol start=\"4\">\n<li><strong> Objective 3: Develop a Secure, Healthy and Efficient Payment System<\/strong><\/li>\n<\/ol>\n<p>Another statutory objective is to develop a secure, healthy and efficient payment system.<\/p>\n<p>This is particularly important in the digital economy.<\/p>\n<p>NRB therefore has an important role in:<\/p>\n<ul>\n<li>Payment systems<\/li>\n<li>Clearing<\/li>\n<li>Settlement<\/li>\n<li>Electronic payments<\/li>\n<li>Digital financial services<\/li>\n<li>Payment-system security<\/li>\n<li>Efficient financial transactions<\/li>\n<\/ul>\n<ol start=\"5\">\n<li><strong> Cooperation with Government Economic Policies<\/strong><\/li>\n<\/ol>\n<p>The Act also provides that NRB shall, without prejudicing its statutory objectives, extend cooperation in implementing the economic policies of the Government of Nepal.<\/p>\n<p>This means NRB and the government have different but interconnected responsibilities.<\/p>\n<p><strong>Government<\/strong><\/p>\n<p>Mainly deals with <strong>fiscal policy<\/strong>, including:<\/p>\n<ul>\n<li>Government revenue<\/li>\n<li>Government expenditure<\/li>\n<li>Taxation<\/li>\n<li>Public borrowing<\/li>\n<li>Government programs<\/li>\n<\/ul>\n<p><strong>NRB<\/strong><\/p>\n<p>Mainly deals with:<\/p>\n<ul>\n<li>Monetary policy<\/li>\n<li>Foreign-exchange policy<\/li>\n<li>Banking regulation<\/li>\n<li>Financial stability<\/li>\n<li>Payment systems<\/li>\n<\/ul>\n<ol start=\"6\">\n<li><strong> Functions and Duties of Nepal Rastra Bank<\/strong><\/li>\n<\/ol>\n<p>Section 5 of the Nepal Rastra Bank Act specifically identifies the Bank&#8217;s functions, duties and powers. The statutory list includes issuing currency, monetary policy, foreign exchange, reserves, licensing and supervision of financial institutions, government banking services, lender-of-last-resort functions, and payment systems.<\/p>\n<p>Let&#8217;s examine each in detail.<\/p>\n<ol start=\"7\">\n<li><strong> Function 1: Issue Banknotes and Coins<\/strong><\/li>\n<\/ol>\n<p>One of NRB&#8217;s fundamental functions is to issue banknotes and coins.<\/p>\n<p>NRB manages the supply and circulation of Nepalese currency.<\/p>\n<p>This involves:<\/p>\n<ul>\n<li>Issuing currency<\/li>\n<li>Managing currency circulation<\/li>\n<li>Maintaining currency quality<\/li>\n<li>Replacing damaged notes<\/li>\n<li>Maintaining public confidence in currency<\/li>\n<li>Ensuring adequate availability of cash<\/li>\n<\/ul>\n<p>The authority to issue banknotes and coins is expressly included in Section 5 of the NRB Act.<\/p>\n<p><strong>Why is this important?<\/strong><\/p>\n<p>If currency were issued without proper monetary management, excessive money supply could contribute to inflation and undermine confidence in the currency.<\/p>\n<ol start=\"8\">\n<li><strong> Function 2: Formulate and Implement Monetary Policy<\/strong><\/li>\n<\/ol>\n<p>NRB formulates and implements monetary policy to help maintain price stability.<\/p>\n<p>Monetary policy influences:<\/p>\n<ul>\n<li>Money supply<\/li>\n<li>Credit<\/li>\n<li>Interest rates<\/li>\n<li>Liquidity<\/li>\n<li>Inflation<\/li>\n<li>Economic activity<\/li>\n<\/ul>\n<p>NRB&#8217;s statutory function is to formulate necessary monetary policies for maintaining price stability and implement them or cause them to be implemented.<\/p>\n<p><strong>Major monetary-policy tools<\/strong><\/p>\n<p>Depending on the monetary-policy framework and prevailing regulations, NRB uses instruments such as:<\/p>\n<ul>\n<li>Policy rates<\/li>\n<li>Open-market operations<\/li>\n<li>Cash Reserve Ratio (CRR)<\/li>\n<li>Liquidity facilities<\/li>\n<li>Deposit collection operations<\/li>\n<li>Refinance facilities<\/li>\n<li>Other quantitative and qualitative instruments<\/li>\n<\/ul>\n<ol start=\"9\">\n<li><strong> Function 3: Formulate and Implement Foreign-Exchange Policy<\/strong><\/li>\n<\/ol>\n<p>NRB formulates and implements foreign-exchange policy.<\/p>\n<p>Foreign exchange is essential for international transactions such as:<\/p>\n<ul>\n<li>Imports<\/li>\n<li>Exports<\/li>\n<li>Foreign education<\/li>\n<li>Foreign travel<\/li>\n<li>International payments<\/li>\n<li>Debt servicing<\/li>\n<li>Foreign investment<\/li>\n<li>Remittance transactions<\/li>\n<\/ul>\n<p>The NRB Act expressly gives the Bank responsibility for formulating and implementing foreign-exchange policies.<\/p>\n<ol start=\"10\">\n<li><strong> Function 4: Determine the Foreign-Exchange Rate System<\/strong><\/li>\n<\/ol>\n<p>NRB has the statutory function of determining the foreign-exchange-rate system.<\/p>\n<p>Nepal&#8217;s exchange-rate arrangement has major implications for:<\/p>\n<ul>\n<li>Import prices<\/li>\n<li>Export competitiveness<\/li>\n<li>Inflation<\/li>\n<li>Foreign investment<\/li>\n<li>External-sector stability<\/li>\n<li>Foreign-exchange reserves<\/li>\n<\/ul>\n<p>This is therefore an important component of monetary and external-sector management.<\/p>\n<ol start=\"11\">\n<li><strong> Function 5: Manage and Operate Foreign-Exchange Reserves<\/strong><\/li>\n<\/ol>\n<p>NRB manages Nepal&#8217;s foreign-exchange reserves.<\/p>\n<p>Foreign reserves provide Nepal with the capacity to meet international payment obligations and act as an important buffer against external shocks.<\/p>\n<p>NRB&#8217;s responsibilities include managing reserve assets in accordance with applicable policies, laws and risk-management principles.<\/p>\n<p>The management and operation of foreign-exchange reserves is specifically identified as an NRB function under Section 5.<\/p>\n<ol start=\"12\">\n<li><strong> Function 6: License Banks and Financial Institutions<\/strong><\/li>\n<\/ol>\n<p>NRB has the authority to issue licenses to commercial banks and financial institutions to conduct banking and financial business.<\/p>\n<p>It also regulates and supervises those institutions after licensing.<\/p>\n<p>The NRB&#8217;s Banks and Financial Institutions Regulation Department specifically identifies licensing and regulation through directives, circulars and notices among its functions.<\/p>\n<p><strong>Why licensing is important<\/strong><\/p>\n<p>Licensing helps ensure that institutions entering the banking business meet minimum requirements relating to:<\/p>\n<ul>\n<li>Capital<\/li>\n<li>Management<\/li>\n<li>Governance<\/li>\n<li>Business plans<\/li>\n<li>Risk management<\/li>\n<li>Infrastructure<\/li>\n<li>Legal compliance<\/li>\n<\/ul>\n<ol start=\"13\">\n<li><strong> Function 7: Regulate Banks and Financial Institutions<\/strong><\/li>\n<\/ol>\n<p>NRB establishes regulatory requirements for banks and financial institutions.<\/p>\n<p>Regulation can cover:<\/p>\n<ul>\n<li>Capital adequacy<\/li>\n<li>Liquidity<\/li>\n<li>Loan classification<\/li>\n<li>Provisioning<\/li>\n<li>Credit concentration<\/li>\n<li>Risk management<\/li>\n<li>Corporate governance<\/li>\n<li>Financial reporting<\/li>\n<li>Consumer protection<\/li>\n<li>Anti-money laundering<\/li>\n<li>Other prudential requirements<\/li>\n<\/ul>\n<p>NRB&#8217;s regulatory role is aimed at protecting depositors and maintaining financial-sector stability.<\/p>\n<ol start=\"14\">\n<li><strong> Function 8: Inspect Banks and Financial Institutions<\/strong><\/li>\n<\/ol>\n<p>Regulation alone is not enough. NRB must also determine whether banks and financial institutions are complying with applicable requirements.<\/p>\n<p>Therefore, NRB carries out inspection and supervision.<\/p>\n<p>It can examine areas such as:<\/p>\n<ul>\n<li>Financial condition<\/li>\n<li>Loan portfolio<\/li>\n<li>Capital adequacy<\/li>\n<li>Liquidity<\/li>\n<li>Governance<\/li>\n<li>Risk management<\/li>\n<li>Compliance<\/li>\n<li>Internal controls<\/li>\n<\/ul>\n<ol start=\"15\">\n<li><strong> Function 9: Supervise and Monitor Financial Institutions<\/strong><\/li>\n<\/ol>\n<p>NRB continuously monitors the financial condition and activities of regulated institutions.<\/p>\n<p>Supervision helps identify problems before they become serious.<\/p>\n<p>For example, NRB can monitor:<\/p>\n<p><strong>Rapid credit growth \u2192 Rising credit risk \u2192 Weak loan quality \u2192 Potential banking-sector instability<\/strong><\/p>\n<p>Early identification allows regulatory intervention where necessary.<\/p>\n<ol start=\"16\">\n<li><strong> Function 10: Banker to the Government<\/strong><\/li>\n<\/ol>\n<p>NRB acts as the banker of the Government of Nepal.<\/p>\n<p>As government banker, it performs banking-related functions for the government, including maintaining government accounts and facilitating government transactions.<\/p>\n<p>This makes NRB an important part of Nepal&#8217;s public financial system.<\/p>\n<ol start=\"17\">\n<li><strong> Function 11: Advisor to the Government<\/strong><\/li>\n<\/ol>\n<p>NRB also acts as an economic and financial advisor to the Government of Nepal.<\/p>\n<p>It can provide analysis and advice on matters such as:<\/p>\n<ul>\n<li>Monetary conditions<\/li>\n<li>Banking<\/li>\n<li>Foreign exchange<\/li>\n<li>Financial stability<\/li>\n<li>Balance of payments<\/li>\n<li>Inflation<\/li>\n<li>Financial markets<\/li>\n<li>Macroeconomic developments<\/li>\n<\/ul>\n<p>The role of banker, advisor and financial agent to the government is specifically provided in Section 5.<\/p>\n<ol start=\"18\">\n<li><strong> Function 12: Financial Agent of the Government<\/strong><\/li>\n<\/ol>\n<p>NRB also acts as the financial agent of the Government of Nepal.<\/p>\n<p>This involves functions associated with government financial operations and government securities within the applicable legal framework.<\/p>\n<p>Government securities may include:<\/p>\n<ul>\n<li>Treasury bills<\/li>\n<li>Development bonds<\/li>\n<li>Other government debt instruments<\/li>\n<\/ul>\n<ol start=\"19\">\n<li><strong> Function 13: Banker to Banks and Financial Institutions<\/strong><\/li>\n<\/ol>\n<p>NRB is known as the banker&#8217;s bank.<\/p>\n<p>Commercial banks and other financial institutions maintain relationships with NRB for purposes such as:<\/p>\n<ul>\n<li>Reserve requirements<\/li>\n<li>Settlement<\/li>\n<li>Liquidity management<\/li>\n<li>Payment systems<\/li>\n<li>Other central-banking services<\/li>\n<\/ul>\n<p>This places NRB at the center of Nepal&#8217;s banking system.<\/p>\n<ol start=\"20\">\n<li><strong> Function 14: Lender of Last Resort<\/strong><\/li>\n<\/ol>\n<p>NRB also acts as the lender of last resort.<\/p>\n<p>This means that under the applicable legal and regulatory framework, NRB can provide liquidity support to eligible banks and financial institutions when they face serious temporary liquidity difficulties.<\/p>\n<p><strong>Importance<\/strong><\/p>\n<p>This function helps:<\/p>\n<ul>\n<li>Prevent bank runs<\/li>\n<li>Maintain depositor confidence<\/li>\n<li>Reduce systemic risk<\/li>\n<li>Maintain financial stability<\/li>\n<\/ul>\n<p>The lender-of-last-resort function is expressly included in Section 5 of the NRB Act.<\/p>\n<ol start=\"21\">\n<li><strong> Function 15: Develop Payment, Clearing and Settlement Systems<\/strong><\/li>\n<\/ol>\n<p>NRB is responsible for establishing and promoting systems for:<\/p>\n<ul>\n<li>Payment<\/li>\n<li>Clearing<\/li>\n<li>Settlement<\/li>\n<\/ul>\n<p>It also regulates these activities.<\/p>\n<p>This function is increasingly important because modern financial transactions are moving from cash toward electronic and digital payments.<\/p>\n<ol start=\"22\">\n<li><strong> Function 16: Liquidity Management<\/strong><\/li>\n<\/ol>\n<p>NRB manages liquidity conditions in the financial system.<\/p>\n<p>Liquidity management involves influencing the amount of funds available to banks and financial institutions.<\/p>\n<p><strong>If liquidity is excessive:<\/strong><\/p>\n<p>It can contribute to:<\/p>\n<ul>\n<li>Excessive credit growth<\/li>\n<li>Inflationary pressure<\/li>\n<li>Asset-price pressures<\/li>\n<\/ul>\n<p><strong>If liquidity is too low:<\/strong><\/p>\n<p>It can cause:<\/p>\n<ul>\n<li>Higher funding costs<\/li>\n<li>Credit contraction<\/li>\n<li>Difficulty meeting obligations<\/li>\n<li>Reduced economic activity<\/li>\n<\/ul>\n<p>Therefore, NRB attempts to maintain appropriate liquidity conditions.<\/p>\n<p>NRB itself identifies liquidity management among its major functions.<\/p>\n<ol start=\"23\">\n<li><strong> Function 17: Refinance Facilities<\/strong><\/li>\n<\/ol>\n<p>NRB can provide <strong>refinance facilities<\/strong> to eligible banks and financial institutions under applicable policies and procedures.<\/p>\n<p>NRB&#8217;s Banks and Financial Institutions Regulation Department lists providing refinance to BFIs among its key functions.<\/p>\n<p>Refinance can be used as a policy mechanism to support particular sectors or address specific economic conditions.<\/p>\n<ol start=\"24\">\n<li><strong> Function 18: Promote Financial Inclusion<\/strong><\/li>\n<\/ol>\n<p>NRB seeks to broaden access to financial services.<\/p>\n<p>Financial inclusion means making financial services accessible to a larger proportion of the population.<\/p>\n<p>It can involve:<\/p>\n<ul>\n<li>Bank accounts<\/li>\n<li>Savings<\/li>\n<li>Credit<\/li>\n<li>Digital payments<\/li>\n<li>Remittance services<\/li>\n<li>Microfinance<\/li>\n<li>Financial literacy<\/li>\n<\/ul>\n<p>Broadening access to financial services is expressly included among NRB&#8217;s statutory objectives.<\/p>\n<ol start=\"25\">\n<li><strong> Function 19: Maintain Public Confidence<\/strong><\/li>\n<\/ol>\n<p>A banking system cannot function effectively without public confidence.<\/p>\n<p>People must believe that:<\/p>\n<ul>\n<li>Banks are safe<\/li>\n<li>Deposits are handled responsibly<\/li>\n<li>Payments will work<\/li>\n<li>Financial institutions are supervised<\/li>\n<li>The monetary system is stable<\/li>\n<\/ul>\n<p>NRB therefore works to increase public confidence through regulation, supervision, monetary management and financial stability measures.<\/p>\n<ol start=\"26\">\n<li><strong> Function 20: Maintain Financial Stability<\/strong><\/li>\n<\/ol>\n<p>Financial stability is one of the most important broader responsibilities of NRB.<\/p>\n<p>NRB monitors risks that could affect the financial system, including:<\/p>\n<ul>\n<li>Credit risk<\/li>\n<li>Liquidity risk<\/li>\n<li>Market risk<\/li>\n<li>Operational risk<\/li>\n<li>Governance weaknesses<\/li>\n<li>Systemic risk<\/li>\n<\/ul>\n<p>The purpose is to prevent problems from spreading across the banking system.<\/p>\n<ol start=\"27\">\n<li><strong> Function 21: Consumer and Depositor Protection<\/strong><\/li>\n<\/ol>\n<p>NRB&#8217;s regulation and supervision help protect depositors and financial consumers.<\/p>\n<p>Its regulatory approach aims to ensure that financial institutions follow appropriate rules and provide financial services within the regulatory framework.<\/p>\n<p>NRB&#8217;s regulatory function specifically refers to protecting depositors and related stakeholders while maintaining financial-sector stability.<\/p>\n<p>NRB&#8217;s regulatory department also lists handling grievances of financial consumers among its functions.<\/p>\n<ol start=\"28\">\n<li><strong> Function 22: Promote a Healthy Banking System<\/strong><\/li>\n<\/ol>\n<p>NRB works to develop a banking system that is:<\/p>\n<ul>\n<li>Safe<\/li>\n<li>Sound<\/li>\n<li>Efficient<\/li>\n<li>Competitive<\/li>\n<li>Transparent<\/li>\n<li>Stable<\/li>\n<\/ul>\n<p>This involves continuous improvement in:<\/p>\n<ul>\n<li>Regulation<\/li>\n<li>Supervision<\/li>\n<li>Corporate governance<\/li>\n<li>Risk management<\/li>\n<li>Technology<\/li>\n<li>Financial infrastructure<\/li>\n<\/ul>\n<ol start=\"29\">\n<li><strong> Function 23: Support Economic Development<\/strong><\/li>\n<\/ol>\n<p>NRB is not a commercial development agency, but its monetary and financial policies can support sustainable economic development.<\/p>\n<p>A stable financial system helps businesses and households obtain financing and conduct transactions.<\/p>\n<p>NRB&#8217;s strategic framework emphasizes monetary management, external-sector management, prudent regulation and supervision, digitalization and financial inclusion.<\/p>\n<ol start=\"30\">\n<li><strong> Function 24: Conduct Economic and Financial Research<\/strong><\/li>\n<\/ol>\n<p>A central bank needs reliable economic information to formulate appropriate policy.<\/p>\n<p>NRB therefore collects and analyzes information relating to:<\/p>\n<ul>\n<li>Inflation<\/li>\n<li>Money supply<\/li>\n<li>Credit<\/li>\n<li>Deposits<\/li>\n<li>Interest rates<\/li>\n<li>Foreign exchange<\/li>\n<li>Foreign reserves<\/li>\n<li>Balance of payments<\/li>\n<li>Banking-sector performance<\/li>\n<li>Macroeconomic developments<\/li>\n<\/ul>\n<p>It also publishes statistical and financial reports.<\/p>\n<ol start=\"31\">\n<li><strong> Function 25: Banking and Financial Statistics<\/strong><\/li>\n<\/ol>\n<p>NRB publishes information and statistics about banks and financial institutions.<\/p>\n<p>Its Banks and Financial Institutions Regulation Department lists publication of monthly and quarterly statistics\/reports among its functions.<\/p>\n<p>Such statistics are useful to:<\/p>\n<ul>\n<li>Government<\/li>\n<li>Banks<\/li>\n<li>Businesses<\/li>\n<li>Researchers<\/li>\n<li>Investors<\/li>\n<li>Students<\/li>\n<li>General public<\/li>\n<\/ul>\n<ol start=\"32\">\n<li><strong> Function 26: Merger and Acquisition Regulation<\/strong><\/li>\n<\/ol>\n<p>NRB also plays a regulatory role in <strong>mergers and acquisitions of banks and financial institutions<\/strong>.<\/p>\n<p>Its regulatory department specifically lists regulation of mergers and acquisitions among its functions.<\/p>\n<p>Mergers can help create institutions with:<\/p>\n<ul>\n<li>Stronger capital<\/li>\n<li>Better risk-bearing capacity<\/li>\n<li>Greater operational efficiency<\/li>\n<li>Improved governance<\/li>\n<li>Better financial stability<\/li>\n<\/ul>\n<ol start=\"33\">\n<li><strong> Function 27: Promote Digital Financial Services<\/strong><\/li>\n<\/ol>\n<p>As Nepal&#8217;s financial system becomes increasingly digital, NRB&#8217;s responsibilities increasingly involve:<\/p>\n<ul>\n<li>Digital payments<\/li>\n<li>Electronic transactions<\/li>\n<li>Payment-system oversight<\/li>\n<li>Financial technology<\/li>\n<li>Cybersecurity-related financial risks<\/li>\n<li>Consumer protection in digital finance<\/li>\n<\/ul>\n<p>The development of a secure and efficient payment system is one of NRB&#8217;s statutory objectives.<\/p>\n<ol start=\"34\">\n<li><strong> Difference Between Objectives, Functions and Duties<\/strong><\/li>\n<\/ol>\n<p>This distinction is important for examinations.<\/p>\n<table>\n<thead>\n<tr>\n<p><td><strong>Term<\/strong><\/td>\n<\/p>\n<p><td><strong>Meaning<\/strong><\/td>\n<\/p>\n<p><td><strong>Examples in NRB<\/strong><\/td>\n<\/p>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<p><td><strong>Objectives<\/strong><\/td>\n<\/p>\n<p><td>What NRB wants to achieve<\/td>\n<\/p>\n<p><td>Price stability, financial stability, efficient payment system<\/td>\n<\/p>\n<\/tr>\n<tr>\n<p><td><strong>Functions<\/strong><\/td>\n<\/p>\n<p><td>What NRB does to achieve its objectives<\/td>\n<\/p>\n<p><td>Monetary policy, regulation, currency issuance<\/td>\n<\/p>\n<\/tr>\n<tr>\n<p><td><strong>Duties<\/strong><\/td>\n<\/p>\n<p><td>Responsibilities NRB is legally expected to perform<\/td>\n<\/p>\n<p><td>Supervision, reserve management, government banking<\/td>\n<\/p>\n<\/tr>\n<tr>\n<p><td><strong>Powers<\/strong><\/td>\n<\/p>\n<p><td>Legal authority given to NRB<\/td>\n<\/p>\n<p><td>Licensing, regulation, inspection and other statutory powers<\/td>\n<\/p>\n<\/tr>\n<\/tbody>\n<\/table>\n<ol start=\"35\">\n<li><strong> Objectives vs Functions<\/strong><\/li>\n<\/ol>\n<p><strong>Objectives answer:<\/strong><\/p>\n<p><strong>&#8220;What does NRB want to achieve?&#8221;<\/strong><\/p>\n<p>For example:<\/p>\n<ul>\n<li>Price stability<\/li>\n<li>Balance-of-payments stability<\/li>\n<li>Financial-sector stability<\/li>\n<li>Greater financial access<\/li>\n<li>Secure payment system<\/li>\n<\/ul>\n<p><strong>Functions answer:<\/strong><\/p>\n<p><strong>&#8220;What does NRB do to achieve those objectives?&#8221;<\/strong><\/p>\n<p>For example:<\/p>\n<ul>\n<li>Formulates monetary policy<\/li>\n<li>Manages foreign exchange reserves<\/li>\n<li>Regulates banks<\/li>\n<li>Issues currency<\/li>\n<li>Supervises financial institutions<\/li>\n<li>Operates payment systems<\/li>\n<\/ul>\n<ol start=\"36\">\n<li><strong> Functions of NRB \u2014 Short Summary<\/strong><\/li>\n<\/ol>\n<p>For easy memorization:<\/p>\n<ol>\n<li><strong> Currency<\/strong><\/li>\n<\/ol>\n<p>Issue banknotes and coins.<\/p>\n<ol start=\"2\">\n<li><strong> Monetary Policy<\/strong><\/li>\n<\/ol>\n<p>Formulate and implement monetary policy.<\/p>\n<ol start=\"3\">\n<li><strong> Foreign Exchange<\/strong><\/li>\n<\/ol>\n<p>Formulate and implement foreign-exchange policy.<\/p>\n<ol start=\"4\">\n<li><strong> Exchange Rate<\/strong><\/li>\n<\/ol>\n<p>Determine the foreign-exchange-rate system.<\/p>\n<ol start=\"5\">\n<li><strong> Foreign Reserves<\/strong><\/li>\n<\/ol>\n<p>Manage foreign-exchange reserves.<\/p>\n<ol start=\"6\">\n<li><strong> Licensing<\/strong><\/li>\n<\/ol>\n<p>License banks and financial institutions.<\/p>\n<ol start=\"7\">\n<li><strong> Regulation<\/strong><\/li>\n<\/ol>\n<p>Regulate BFIs.<\/p>\n<ol start=\"8\">\n<li><strong> Inspection<\/strong><\/li>\n<\/ol>\n<p>Inspect BFIs.<\/p>\n<ol start=\"9\">\n<li><strong> Supervision<\/strong><\/li>\n<\/ol>\n<p>Supervise and monitor BFIs.<\/p>\n<ol start=\"10\">\n<li><strong> Government Banker<\/strong><\/li>\n<\/ol>\n<p>Act as banker to the government.<\/p>\n<ol start=\"11\">\n<li><strong> Government Advisor<\/strong><\/li>\n<\/ol>\n<p>Provide financial and economic advice.<\/p>\n<ol start=\"12\">\n<li><strong> Financial Agent<\/strong><\/li>\n<\/ol>\n<p>Act as financial agent of the government.<\/p>\n<ol start=\"13\">\n<li><strong> Banker&#8217;s Bank<\/strong><\/li>\n<\/ol>\n<p>Act as banker to BFIs.<\/p>\n<ol start=\"14\">\n<li><strong> Lender of Last Resort<\/strong><\/li>\n<\/ol>\n<p>Provide last-resort liquidity support where appropriate.<\/p>\n<ol start=\"15\">\n<li><strong> Payment System<\/strong><\/li>\n<\/ol>\n<p>Develop and regulate payment, clearing and settlement systems.<\/p>\n<ol start=\"16\">\n<li><strong> Liquidity Management<\/strong><\/li>\n<\/ol>\n<p>Manage liquidity in the financial system.<\/p>\n<ol start=\"17\">\n<li><strong> Financial Inclusion<\/strong><\/li>\n<\/ol>\n<p>Increase access to financial services.<\/p>\n<ol start=\"18\">\n<li><strong> Financial Stability<\/strong><\/li>\n<\/ol>\n<p>Maintain a safe and stable banking system.<\/p>\n<p>These core functions are based on Section 5 of the Nepal Rastra Bank Act and NRB&#8217;s own description of its responsibilities.<\/p>\n<ol start=\"37\">\n<li><strong> Objectives of NRB \u2014 Easy-to-Remember Version<\/strong><\/li>\n<\/ol>\n<p>Remember the <strong>3 major statutory objectives<\/strong>:<\/p>\n<ol>\n<li><strong> Price &amp; External Stability<\/strong><\/li>\n<\/ol>\n<p>Maintain price and balance-of-payments stability through monetary and foreign-exchange policies.<\/p>\n<ol start=\"2\">\n<li><strong> Financial Stability &amp; Access<\/strong><\/li>\n<\/ol>\n<p>Maintain banking and financial-sector stability, increase public confidence and broaden access to financial services.<\/p>\n<ol start=\"3\">\n<li><strong> Payment System<\/strong><\/li>\n<\/ol>\n<p>Develop a secure, healthy and efficient payment system.<\/p>\n<p>These are the core objectives stated by NRB and under Section 4 of the NRB Act.<\/p>\n<ol start=\"38\">\n<li><strong> How NRB&#8217;s Functions Affect the Economy<\/strong><\/li>\n<\/ol>\n<p>The relationship can be illustrated as:<\/p>\n<p><strong>NRB<\/strong><\/p>\n<p>\u2193<\/p>\n<p><strong>Monetary + Foreign Exchange Policy<\/strong><\/p>\n<p>\u2193<\/p>\n<p><strong>Money Supply + Credit + Interest Rates + Liquidity<\/strong><\/p>\n<p>\u2193<\/p>\n<p><strong>Consumption + Investment + Production<\/strong><\/p>\n<p>\u2193<\/p>\n<p><strong>Employment + Income + Economic Activity<\/strong><\/p>\n<p>\u2193<\/p>\n<p><strong>Economic Stability + Sustainable Development<\/strong><\/p>\n<p>At the same time:<\/p>\n<p><strong>NRB Regulation &amp; Supervision<\/strong><\/p>\n<p>\u2193<\/p>\n<p><strong>Safer Banks<\/strong><\/p>\n<p>\u2193<\/p>\n<p><strong>Depositor Confidence<\/strong><\/p>\n<p>\u2193<\/p>\n<p><strong>Financial Stability<\/strong><\/p>\n<p>And:<\/p>\n<p><strong>NRB Payment-System Development<\/strong><\/p>\n<p>\u2193<\/p>\n<p><strong>Efficient Digital &amp; Electronic Payments<\/strong><\/p>\n<p>\u2193<\/p>\n<p><strong>Lower Transaction Friction<\/strong><\/p>\n<p>\u2193<\/p>\n<p><strong>More Efficient Economy<\/strong><\/p>\n<ol start=\"39\">\n<li><strong> Importance of NRB&#8217;s Functions<\/strong><\/li>\n<\/ol>\n<p>The functions of NRB are important because the central bank provides the institutional foundation for Nepal&#8217;s monetary and financial system.<\/p>\n<p><strong>Without effective central-bank functions, there could be risks of:<\/strong><\/p>\n<ul>\n<li>Excessive inflation<\/li>\n<li>Banking instability<\/li>\n<li>Poor-quality lending<\/li>\n<li>Bank runs<\/li>\n<li>Liquidity crises<\/li>\n<li>Foreign-exchange problems<\/li>\n<li>Payment-system failures<\/li>\n<li>Loss of public confidence<\/li>\n<li>Financial-sector instability<\/li>\n<\/ul>\n<p>Therefore, NRB serves as an important guardian of monetary and financial stability.<\/p>\n<ol start=\"40\">\n<li><strong> Exam-Oriented Answer<\/strong><\/li>\n<\/ol>\n<p>If this question comes in a BBA, BBS, MBA, banking, finance or competitive examination, you can structure your answer as follows:<\/p>\n<p><strong>Introduction<\/strong><\/p>\n<p>Nepal Rastra Bank is the central bank of Nepal, established in 1956. Under the Nepal Rastra Bank Act, 2058 (2002), it is responsible for monetary and foreign-exchange policy, banking and financial-sector stability, and development of a secure, healthy and efficient payment system.<\/p>\n<p><strong>Objectives<\/strong><\/p>\n<ol>\n<li>Maintain price stability.<\/li>\n<li>Maintain balance-of-payments\/external-sector stability.<\/li>\n<li>Support overall economic stability and sustainable economic development.<\/li>\n<li>Maintain banking and financial-sector stability.<\/li>\n<li>Increase public confidence in the banking and financial system.<\/li>\n<li>Increase access to financial services.<\/li>\n<li>Develop a secure, healthy and efficient payment system.<\/li>\n<li>Cooperate with government economic policies without compromising its statutory objectives.<\/li>\n<\/ol>\n<p><strong>Major Functions and Duties<\/strong><\/p>\n<ol>\n<li>Issue banknotes and coins.<\/li>\n<li>Formulate and implement monetary policy.<\/li>\n<li>Formulate and implement foreign-exchange policy.<\/li>\n<li>Determine the foreign-exchange-rate system.<\/li>\n<li>Manage foreign-exchange reserves.<\/li>\n<li>License banks and financial institutions.<\/li>\n<li>Regulate banks and financial institutions.<\/li>\n<li>Inspect, supervise and monitor BFIs.<\/li>\n<li>Act as banker to the Government of Nepal.<\/li>\n<li>Act as advisor to the government.<\/li>\n<li>Act as financial agent of the government.<\/li>\n<li>Act as banker to banks and financial institutions.<\/li>\n<li>Act as lender of last resort.<\/li>\n<li>Develop and regulate payment, clearing and settlement systems.<\/li>\n<li>Manage liquidity.<\/li>\n<li>Provide refinance facilities according to applicable policies.<\/li>\n<li>Promote financial inclusion.<\/li>\n<li>Protect depositors and financial consumers through regulation and supervision.<\/li>\n<li>Promote financial stability.<\/li>\n<li>Collect, analyze and publish financial and economic information.<\/li>\n<li>Regulate mergers and acquisitions of BFIs.<\/li>\n<li>Support development of secure and efficient digital financial systems.<\/li>\n<\/ol>\n<ol start=\"41\">\n<li><strong> Conclusion<\/strong><\/li>\n<\/ol>\n<p>Nepal Rastra Bank is the apex monetary and financial authority of Nepal. Its objectives are centered on price and external-sector stability, banking and financial-sector stability, broader access to financial services, and a secure and efficient payment system. Its functions include currency issuance, monetary-policy implementation, foreign-exchange management, reserve management, licensing and supervision of banks and financial institutions, government banking services, lender-of-last-resort facilities, liquidity management and payment-system development.<\/p>\n\n","protected":false},"excerpt":{"rendered":"<p>Functions, Objectives and Duties of Nepal Rastra Bank (NRB) Introduction Nepal Rastra Bank (NRB) is the central bank of Nepal. It was established on April 26, 1956, under the Nepal Rastra Bank Act, 1955. The current principal legal framework is the Nepal Rastra Bank Act, 2058 (2002). As the central bank, NRB is different from [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":37533,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1212],"tags":[],"class_list":["post-37537","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-study-zone-en"],"acf":[],"jetpack_featured_media_url":"https:\/\/bankingsansar.com\/wp-content\/uploads\/2026\/08\/nrb-function.png","publishedDateNp":"\u0967\u0966 \u092d\u093e\u0926\u094d\u0930 \u0968\u0966\u096e\u0969, \u092c\u0941\u0927\u092c\u093e\u0930 \u0967\u096d:\u096a\u096d","_links":{"self":[{"href":"https:\/\/bankingsansar.com\/bs_api\/wp\/v2\/posts\/37537","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bankingsansar.com\/bs_api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bankingsansar.com\/bs_api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bankingsansar.com\/bs_api\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bankingsansar.com\/bs_api\/wp\/v2\/comments?post=37537"}],"version-history":[{"count":1,"href":"https:\/\/bankingsansar.com\/bs_api\/wp\/v2\/posts\/37537\/revisions"}],"predecessor-version":[{"id":37538,"href":"https:\/\/bankingsansar.com\/bs_api\/wp\/v2\/posts\/37537\/revisions\/37538"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bankingsansar.com\/bs_api\/wp\/v2\/media\/37533"}],"wp:attachment":[{"href":"https:\/\/bankingsansar.com\/bs_api\/wp\/v2\/media?parent=37537"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bankingsansar.com\/bs_api\/wp\/v2\/categories?post=37537"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bankingsansar.com\/bs_api\/wp\/v2\/tags?post=37537"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}