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by providing finance and credit to these sectors. It adopts such a monetary
policy as is conducive to economic growth.
8. Acts as the lender of last resort : Central bank rescues commercial banks from a
sudden and large demand of cash. It is the duty of central bank to meet demand
for cash by a bank at the time of emergency when panic prevails among the
public and people’s confidence has been shaken and when other banks have
refused to supply credit.

B. Commercial Bank

A commercial bank is a business organization which deals in money; it borrows and
lends money. In this borrowing and lending of money, it makes profit. The difference
between money lenders and commercial banks should be clear. Money lender only
lends money to others from its own sources but commercial banks do both the lending
and borrowing business. A commercial bank raises its resources through borrowing
from the public in the forms of deposits and lends them to the businessman. Its
lending rate of interest is greater than the borrowing. It is because of this difference in
lending and borrowing rates of interest that it is able to make profits.

According to W. Leaf, “A commercial bank is the corporation which holds
itself out to receive from the public, deposit payable on demand by cheques.”

The first commercial bank of Nepal is Nepal Bank Limited which was established in
1994 BS. It is the first bank in the banking history of Nepal. Long after the establishment
of Nepal Bank, on 2022 Magh 10, Nepal Rastriya Banijya Bank and on 2024 Magh 7,
Agriculture Development Bank were established.

Functions of Commercial Banks

The main functions of commercial banks can be summed up as – to borrow and
to lend. To receive deposits and to advance loans are the two main functions of all
commercial banks. They borrow in the form of deposit and lend in various forms of
advances. Besides, there are miscellaneous functions which are discussed below :
1. Accepting deposit : The bank borrows in the form of deposits. This function
is very important because banks mainly depend on the funds deposited with
them by public. The bank accepts the deposits under the following accounts:
a. Current account : Any amount can be depositary withdrawn in current
account several times in a day. No, interest is allowed by bank to the account
holder in this account. Some banks do allow interest even in current account.
b. Saving account : This account is managed to collect the deposit of those who
want to deposit their small saving in a bank, which they need to withdraw

42 Office Practice and Accounting 10