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central bank of Nepal. It was established in 14 Baisakh, 2013 B.S. under Nepal Rastra
th
Bank Act, 2012 with one crore of authorised capital.
According to Dr. D. Kock, “Bank which constitutes the apex of the monetary and banking
structure of its country is called a central bank.”
Same as Dictionary of Banking and Finance, “Main government controlled bank in a country
which controls the financial affairs of the country by fixing main interest rates, issuing currencies,
supervising the commercial bank and controlling the foreign exchange rate.”

The distinguished characteristics of the central bank are that, it is fully owned and
managed by government and there is only one central bank in a country. ‘Reek bank of
Sweden’ is the first central bank in the world which was established in 1656 AD. ‘Bank of
England’ (1694 A.D) is the central bank of England, ‘Reserve Bank of India’ is the central
bank of India, ‘State Bank of Pakistan’, ‘Federal Reserve Bank’ and ‘Central Bank of China’
are the central banks of Pakistan, USA and China respectively.

Key Point Central bank refers to the government bank which holds top most position
in the monetary and banking sectors of a country.

8. Functions of Central Bank
Central Bank performs the following functions:

i. Issues of Notes and Currencies
Central bank has got right to issue notes under the permission of the government.
It issues coins and paper notes. At least 50% security of gold, silver, dollar and other
government security should be deposited in World Bank while issuing notes in the
country. The first paper note were issued in 1 Aswin, 2002 B.S. in Nepal but Nepal Rastra
st
Bank started to issue the notes since 2016 B.S. The pictures used in notes are taken from
various sectors and designed by the note design committee and finally it is decided by the
Government of Nepal. Central bank has issued notes of 1, 2, 5, 10, 20, 25, 50, 100, 250, 500,
and 1000 values till the date.
ii. Working as the Government’s Bank
Central bank is the bank of the government. It accepts the government deposit and
disburses payments. It also, transfers the government’s money from one place/office to
another as the instruction of the government. It also performs the functions of purchases
and sales of gold, silver and other securities on behalf of the government.
iii. Working as the Banker of Other Banks
Central bank has the sole right to give permission to establish banks in the country.
The other banks conduct their activities within the framework of the banking policy
formulated by Central Bank. In this sense, it is the father of other banks, which gives
birth to them. It gives instructions for the acceptance of deposit, granting loan and credit,
paying or charging interest, etc. It gives permission to other banks to conduct their
activities by keeping security deposit from them, providing credit facilities and financial
and administrative assistance as per the rules and regulations. Thus, Central Bank acts as
the banker of other banks.

66 Aakar’s Office Practice and Accountancy - 10 Financial Institutions 67