Page 62 - Account 10

1. Introduction
Generally, financial institutions refer to such institutions, which involve in some
sort of financial activities by collecting the saving of the people and mobilising it for the
productive purposes. In this sense, financial institutions may be categorised as banking
and non-banking financial institutions. Financial institutions accept savings of the public
and firms as deposit or premium and mobilise it in the form of capital or lending money
to the entrepreneurs and organizations against securities of no guarantee of its members.
According to NR Bank Act, 2012, “The financial institution in Nepal refers to any institution
established with the objective of providing loan to agriculture, cooperative, industry or any other
specific economic sectors or of accepting deposit from the general public. The term also refers to any
other institution called financial institutions by the Government of Nepal by publishing a notice
in Nepal Gazette.”
According to A.T.K. Ukrant, ‘Financial institutions are investment intermediaries linking the
savers and users of capital.’

Thus, financial institutions are those which accept deposit and grant loan to the person
or organisation. The financial institutions are the investment intermediaries between the
savers and users of capital.

Key Point Financial institution is an institution involved in financial activities as the
investment intermediaries between the savers and the users of capital.

2. Types of Financial Institutions

Financial institutions are of different types in terms of the nature and scope of work.
Mainly the financial institutions can be categorised as banking and non-banking financial
institutions. The different financial institutions in Nepal are as follows:
Types of Financial Institution

Banking Financial Institution Non-banking Financial Institution

Bank Finance Finance Employees Citizen Insurance
Company Cooperative Provident Fund Investment Trust Company

BANK

3. Introduction
Most of the human beings are busy in either type of occupations i.e. employment,
profession or business. Generally, they earn some amount of income and make necessary
expenses in a regular course. Some of the persons may have some portion of their income
after satisfying their necessities. It is known as surplus income. They want due security
of their surplus income from fire, theft, unnecessary spending etc. on one hand and some
amount of risk free return i.e. interest on it, on the other. This has led to the development
of the concept of bank.

62 Aakar’s Office Practice and Accountancy - 10 Financial Institutions 63