Development Bank

Development Bank:

Introduction:

Development banks are established to promote industrial, agriculture, tourism, hydro-power sector of the country by satisfying major funding needs of these sectors. In Nepal, Development banks fall under 'B' class. In Nepal development banks are established under the Company Act, 2063 and its operation are carried as per the Bank and Financial Institution Act, 2063. Nepal Industrial development corporation (NIDC), Agriculture development bank ltd, Rural development bank and a number of private development banks have been established as development bank in Nepal under this act.

"Societe General de Beljique" was the first development bank in the world. It was established in 1822 A.D. in Belgium.

Banks established with the objective of providing financial and technical assistance for the development of the basic infrastructure of the country's economy like agriculture, industry, mine, commerce, transport, communication and hydro power is known as development bank.

According to A.G. Kheradjou, "A development bank is like a living organism that reacts to the social-economic environment and it's success depends on reacting most aptly to that environment."

Q) What do you mean by development banks? Describe its banking and development functions.

Ans: Banks established with the objective of providing financial and technical assistance for the development of the basic infrastructure of the country's economy like agriculture, industry, mine, commerce, transport, communication and hydro power is known as development bank.

The functions of a development bank can be classified into two categories which are as follows;

i) Development Function

ii) Banking Function

Both development and banking functions are discuss below;

Development Functions:

a) Making good environment for investment: One of the main functions of the development bank is to encourage the national and international investors for investment in different sectors by creating good, secure and trusted environment.

b) Establishment of industries, promotion of industries and research of technology: Development banks help in the establishment and promotion of new industries, agriculture and rural areas by providing financial, technical and administrative assistance to industries, farmers and small business enterprises in the village and town areas. They take active participation in the research and invention of new science and technology.

c) Selects the priority sectors: The development bank identifies and select the development need and priority of different areas of the country. On the basis of such development need and priority of different sectors, the banks make the necessary arrangement for their development.

d) Helps to make good plans and policies: Development banks, directly or indirectly help the industrial unit by managing materials, capital products i.e. land building machinery etc. to operate the activities of industries.

e) Product Analysis:  Development bank analyses the different types of product and they will give suggestion to operate the best product. In product analysis, the availability of raw materials, laborer, transportation, market and products' demands are analyzed. 

Banking Functions:

a) Accept deposit: As commercial banks, development banks also accept public deposits providing some interest amount. 

b) Provides loan: Development banks provides loan to industrial firm and agriculture sectors. They will provide short-term, mid-term and long-term loan in different sectors. 

c) Agency function: Development banks also provide agency functions to their clients or customers by accepting deposits from third parties, paying their expenses, and collecting incomes and receivables on their behalf. It purchases and sells the shares, debentures, bills of exchange. 

d) Remit Money:Remittance of money is another important banking function of the development bank. It issues bank draft, mail draft, mail transfer and telegraph transfer which enable safe remittance of money from one place to another place.

2. What is the full form of NIDC?
The full form of NIDC is Nepal Industrial Development Corporation.

3. What is Agriculture Development Bank (ADB)?

The bank, which is established to develop the agricultural sector of the country, is called Agriculture Development Bank (ADB).

4. Why is Agriculture Development Bank (ADB) established?
Agriculture Development Bank (ADB) is established to grant agricultural credit to farmers and cooperatives for the overall development of agricultural sector.

5. When was Nepal Industrial and Development Corporation established?
Nepal Industrial and Development Corporation was established in 2016 B.S. under NIDC Act, 2016.