Until two decades ago, when you went to the counter of Nepali banks to withdraw money by presenting a check, you had to stand in a queue for hours. The counter staff would give you a token, and after a few hours, it would be your turn to carry the token. There was no accounting for the high transaction costs that customers had to bear due to managerial inefficiency.

Times have changed today. The situation of banks, employees and customers has changed. Due to the development of technology, the money in your account can be sent to others at any time. You can buy goods from department stores while sitting at home, and you can order food from restaurants. And farmers who produce oranges, apples and cardamom in the hilly districts can be paid for their crops while sitting in Kathmandu.

Nepal had to wait a few more decades for competitive and modern technology-based banking. In the early 2040s, Nepal faced a balance of payments deficit for three consecutive years. QR code has become the talk of the town today. In Asad 2078, the monthly transaction of payments made using QR codes was 365.1 million. In one month of Pus 2082, such amount has reached 129.18 billion. A significant part of the government's revenue is being collected online. The use of technology has not only increased financial access, but also increased the transparency of transactions.

There is a possibility that the informal economy will gradually become formal. In order for the banking sector to reach its current stage, both policy changes and technological development have played an equal role.

Although the history of modern banking development in Nepal is not very old, Nepal's first bank, Nepal Bank Limited, is completing 100 years in 2094 BS. In the context of Nepal, this bank is a good example of private-public partnership. Nepal Rastra Bank, the central bank, was established on 14 Baisakh 2013 as a bank of banks. After this, the pace of Nepal's banking development continued to advance.

In 2016 BS, Nepal Industrial Development Corporation, on 10 Magh 2022, Rastriya Banijya Bank and on 7 Magh 2024 BS, the establishment of these banks made a significant contribution to the expansion of banking services and economic development. With two commercial banks and two development banks, it became easier for the Rastra Bank to exercise monetary policy tools. However, with the revaluation of the Nepalese currency against the Indian currency on 24 Jestha 2023, the Nepal Rastra Bank implemented the credit control system for the first time on 31 Shrawan 2023 and started practicing monetary policy.

Nepal had to wait a few more decades for competitive and modern banking. In the early 2040s, Nepal faced a balance of payments deficit for three consecutive years. Such deficits in the fiscal years 2039/40, 2040/41 and 2041/42 forced Nepal to take the path of economic liberalization. Since 2041, the private sector has started establishing banks with foreign joint capital investment. Nepal Arab Bank Limited was established for the first time in 2041 BS as a joint-stock investment bank, and by mid-2046 BS, 3 banks were added from the private sector, bringing the total number of commercial banks to 5. The demand for credit from the private sector continued to increase. In mid-2040 BS, credit from banks to the private sector was 8 percent of the gross domestic product, but it reached 11.6 percent by mid-2046 BS.

The political change that took place in 2046 BS was important for the development and expansion of Nepal's economy. This change opened the door to easy entry for the private sector not only in banking but also in all sectors of industry, trade, education, health, and communication. The expansion of industry, trade, and other sectors in the economy further expanded the financial sector. In the fiscal year 2049/50, three commercial banks were added at once, while 7 new finance companies and two rural development banks came into operation. After the political change in 2063 BS, the number of bank financial institutions continued to increase. Even after a large number of mergers and acquisitions in the last 10 years, there are currently 20 commercial banks, 17 development banks, 17 finance companies, 51 microfinance financial institutions and 1 infrastructure bank operating across the country.

During the liberalization exercise, the number of branches added to banks and financial institutions also increased. In 2047 Asad, there were 441 branches of commercial banks across the country, but in 2082 Asad, the number of branches reached 5,099. After the implementation of the Constitution of Nepal in 2072, it was necessary to provide branches of commercial banks to every municipality in the process of implementing federalism. Especially due to the lack of expansion of technology and geographical difficulties, it was not easy to provide branches to all municipalities.

Internet banking in 2002, SMS banking in 2004, wallet launched by eSewa in 2010, and electronic check clearing launched by Nepal Clearing House Limited in 2012 are important efforts to modernize the banking system. Asad 2074, there were branches of commercial banks in only 296 municipalities. With the determination of the Nepal Rastra Bank and the commitment of banks, commercial bank branches reached 631 municipalities in 2075 Asad. In the fiscal year 2074/75 alone, 335 additional local level commercial bank branches were opened. Currently, 753 municipalities have commercial bank branches.

With the expansion of bank branches, the population receiving services per branch is at a convenient level. In Falgun 2072, the average population receiving services from each branch of a bank financial institution was 6,848, while in Pus 2082, this number was 2,544. Providing banking services in this way was a matter of imagination 40 years ago.

Around 2043, the then government had set a target of providing one bank branch for every 30,000 people. Strong evidence of banking expansion is the significantly expanded number of deposit accounts and loan accounts. In 2082, the number of deposit accounts reached 61.8 million and the number of loan accounts reached 20.24 million. Loans to the private sector account for 92 percent of the gross domestic product. High remittance inflows have increased the lending capacity of banks. The expansion of banking services has also enabled loans to be extended to sectors such as agriculture, energy, and small household enterprises. The compulsory provision made by the National Bank for loans to the energy sector has also been a catalyst behind the active participation of the private sector in hydropower production.

Due to the open political system and liberal economic policy, after 2046, not only competition but also the use of modern technology began in the banking sector. The practice of issuing credit cards for the first time by private sector banks was introduced in 1990, and ATM services were started in 1995. Facilities like internet banking in 2002, SMS banking in 2004, wallet launched by eSewa in 2010, and electronic check clearing started by Nepal Clearing House Limited in 2012 are important efforts to modernize the banking system.

As a result of all these efforts, the use of tools like debit cards, credit cards, internet banking, mobile banking, and e-commerce has increased. Recently, tourists from India and China visiting Nepal have been able to pay through QR. In the coming days, Nepalis will also be able to use this facility while traveling abroad.

Another fact that should not be forgotten is the financial sector reform program that was launched in 2000. This program played an important role in strengthening Nepal's financial sector from an institutional perspective. Nepal Bank Limited and Rastriya Banijya Bank, which were about to go bankrupt, were rescued during the reform process.

Nepal Rastra Bank Act, 2058 and Banks and Financial Institutions Act, 2063 were formulated. The autonomy of the Rastra Bank was ensured under the new Act. After the enactment of the Nepal Rastra Bank Act, 2058, the practice of making the monetary policy public annually and reviewing the previous year's monetary policy began.

From the fiscal year 2061/62, a semi-annual review of monetary policy was made and from the fiscal year 2073/74, a quarterly review of monetary policy was made. Nepal Rastra Bank is moving forward in the process of using modern practices in monetary policy formulation and monetary management. The interest rate corridor system currently in use is also a link in this. Nepal is also following international good practices such as Basel 3 implemented by the Bank for International Settlements in the field of bank regulation.

Nepal's banks are also working to fulfill their social responsibilities. The system of allocating one percent of their net profit for corporate social responsibility obliges banks and financial institutions to support financial literacy promotion, education, and health of those below the poverty line.

Banks are required to spend a minimum of 3 percent of the total salary and allowance amount of the previous fiscal year on training and career development to enhance the skills of their employees. This system contributes not only to the banking sector but also to the production of skilled manpower in the country in a broader sense.

The system of banks disbursing a minimum of 40 percent of loans to agriculture, energy, micro, small and medium enterprises and a minimum of 5 percent to the poor has made banks active in fulfilling their responsibilities for social justice and sustainable development. Issues such as guidelines on considering environmental and social risks while investing in loans and the formulation of a green taxonomy have encouraged banks and financial institutions to contribute to mitigating the effects of climate change. Work has been done to advance competition and regulation in a coordinated manner on the basis of open politics and liberal economic policies.