ASSIGNMENT 1

BANK OPERATIONS AND MANAGEMENT

SERVICES OFFERED BY NEPALESE COMMERCIAL BANKS

Submitted To Rajesh Gurung, M.Phil Faculty, Bank Operations and Management Uniglobe College, Pokhara University

Submitted By Sajana Shrestha MBA (Finance) Trimester III, Roll No. 20

8th January, 2013

Banks form a crucial link in a countrys financial system (demand and supply of loan able funds) and their well-being is imperative for the economy. While deregulation and open door policy has opened up new vistas for banks to augment revenues, it has entailed greater competition and consequently greater risks. This has significantly led Nepalese commercial banks whether it is a government, private or foreign joint venture banks to adjust its product and service mix in order to cope with increased competition and shifting needs as well as demands of the customers. Further, these developments have facilitated greater choices for customers who have become more sensitive and demanding compelling banks to offer a broader range of products and services through diverse distribution channels. Commercial banks have popularly tailored its products and services namely in retail or personal banking and corporate or wholesale banking. So, it seems that both individual customers and businesses are taken care of. However, the major products and services offered by the Nepalese commercial banks can be discussed under following service areas and sub areas. 1. Deposit Accounts or Services: This service offered by the commercial banks is targeted towards the transaction needs of their customers. It is major banking activity to collect deposits from its customers. The bank collects deposits under different types of accounts and pays it according to the claims. a. Saving Deposit: Saving deposit account is designed with array of features which not only ensures attractive returns to idle money but also makes personal or retail banking convenient and efficient. Saving accounts provide interest rates and is checkable. Student savings, children saving accounts, elderly saving accounts etc are some popular products under saving deposit accounts. b. Current Deposit: This deposit service is designed with special focus to traders and business firms in order to regulate their daily transaction with other entities and individuals. Usually the minimum balance requirement is high compared to saving account and it is non interest bearing service providing hassle free day to day transaction. c. Fixed Deposit: Fixed deposit account ensures safe custody of customers fund along with attractive interest rates. It allows investors to diversify their portfolio as suited and can enjoy wide option of tenure. Usually fixed deposit accounts provide greater interest rates to the depositors. It can also be pledge as collateral against loans. d. Call Deposit: Call deposit is of fixed deposit nature however the tenure is quite less ranging from seven days to 1 month. Attractive interest rates with additional facility of that of fixed deposit account. 2. Credit or Lending Services: Credit or lending services is designed to meet the funding requirements of the retail and corporate customers of the bank. a. Retail Lending Services: It is designed to fulfill the personal or individual financing needs. Some examples of retail lending products or services offered by Nepalese commercial banks are home loan, auto loan, education loan, personal loan, loan against gold and silver, margin loans, credit card loans etc.

b. Corporate Lending Services: This service is intended to meet the financing needs of the businesses and corporate houses. Corporate lending services can be broadly divided into funded facilities and non funded facilities. i. Funded Facility: The banks provide funding and assistance to actually purchase business assets or to meet business expenses. Some examples of corporate funding facilities are term loan, overdraft loan, hypothecation loan, pledge loan, importexport loan, trust receipt loan, hire purchase loan, loan against government bonds and first class bank guarantee etc. SME loan is one of the most popular funded credit service offered by the commercial banks in Nepal. ii. Non Funded Facility: Banks often provide some non funded credit facility in which banks accept payments on behalf of their customers. Letter of credit, bank guarantee, advance payment guarantee are some non funded credit facilities. 3. Remittance Services: Commercial banks provide domestic, international, inward and outward remittance services through network with various foreign banks and remittance companies. Certain commission is charged for the remitted amount. This service is provided by various ways like mail transfers, telegraphic transfers, SWIFT, draft etc. 4. Electronic Banking Services: Wide array of electronic banking services are provided by the commercial banks. To name some mobile banking, internet banking, ATM or debit card etc are electronic banking services. These types of service provided by the banks enable customers to use banking services in an instant way without hassles. 5. Foreign Exchange: It is one of the most important services provided by the banks to the customer helping them to exchange the foreign currency either sell or purchase whenever needed. In addition, commercial banks do have a foreign currency account which can only be maintained if associated term, conditions and legal obligation is fulfilled. 6. Safe Keeping of Valuables: Commercial banks provide locker service to their customers to ensure safety of the valuables. 7. Merchant Banking & Issue Management: Under this service, the commercial banks manages IPO and rights offering, equity mobilization for infrastructure projects from private Equity investors, bulk and block trades on Exchanges, and off-market transactions, offerings of convertible securities, public offering of corporate structured bonds etc. 8. Refund Management: Today some commercial banks offer comprehensive refund management service with experienced and skilled refunds calculation staffs in order to help customer or the institutional customer monitor and control their refund management process. Dealing with the internal revenue department and tax office is difficult and can be very confusing. This is why this service is very important mainly to corporate houses. 9. Discounting Services: Commercial bank plays a mediator for the flow of the national currency in the market or economy. During this process, the banks provide the service of converting the currency notes. Bills, cheques and drafts are also converted into cash. 10. Priority Banking Services: Some commercial banks provide exclusive services with a new level of care and attention whilst fulfilling the entire range of financial needs of most valued

customers. Personalized services, service quality, privacy etc are some features of this service. There are some other services like security dealership, trust services, any branch banking services, utility bill payments, recharge card services etc. Even though the services offered by 32 commercial banks are not alike; however, we in aggregate level can sum that above mentioned services are generally offered by the commercial banks in Nepal.