Commercial banks are those banks, which perform all kinds of banking functions as accepting deposits, advancing credits, credits creation and agency functions etc. They provide short-term credit, medium-term credit and long term credit for trade and industry. They also operate off-balance sheet functions such as issuing guarantee, bonds, letter of credit etc.
In every country, outset of economic development is quite different but there is no debate about the significant role of banking sector for the economic development of the countries as they are considered as the main source of finance. Without the development of sound commercial banking, under developed countries cannot hope to join the ranks of advanced countries. If industrial development requires the use of capital, the use of capital equipment will not be possible without the necessary capital. Industrial development will be impossible without the existence of markets of the goods produced. On the other hand, the services of the commercial Banks will help to extend the market. The commercial banks play an important role as follows:
a. Help in business expansion
b. Encouragement for the right type of industries.
c. Necessary for trade and industry.
d. Transfer of surplus funds to needy
e. Promotion of capital formation.
Commerce is the financial transactions related to selling and buying activities of goods and services. Therefore, commercial banks are those banks, which work form commercial viewpoint. They perform all kinds of banking functions as accepting deposits, agency function. They provide short-term credit, medium term credit and long term credit to trade and industry. They also operate off balance sheet functions such as issuing guarantee bonds, letter of credit etc.
Commercial bank acts as an intermediately; accepting deposits and providing credits to the needy area. The main source of the commercial bank is current deposit, so they give more importance to the liquidity of investment and as such they specialize in satisfying the short-term credit needs of business other than the long-term commercial banks are restricted to invest their funds in corporate securities. Their business is confined to financing the short-term needs of trade and industry such as working capital financing. They cannot finance in fixed assets. They grant credits in the form of cash credits and overdrafts. Apart from financing, they also render services like collection of bills and cheques, safe keeping of valuables, financial advising etc to their customers.
This chapter highlights the literature that is available in concerned subject; fund mobilization of two joint venture banks (Himalayan Bank Limited and Everest Bank Limited).
Joint venture banks are the commercial banks firmed by joining the two or more enterprises. They are the mode of trading to achieve mutual exchange of goods and services for sharing comparative advantage by performing joint investment scheme between Nepalese their parent banks, which have been experiencing highly mechanized and efficient modern banking management skill and international of banking institutions. Joint venture banks are established by joining two difference forces and with ability to achieve common goal with each of the partners. They are more efficient and effective monetary institution in modern banking fields then other old types of bank in Nepalese context. The primary objective of the joint venture banks is always to earn profit by investing or granting the loans and advances to the people associate with trade, business, industry etc. That means they are required to mobilize their resources properly to acquired profit.
Joint venture is a joining of force between two or more enterprises for the purpose of carrying out a specific operation (Industrial and commercial investment production or trade (Gupta, 1994).
All the Nepalese JVBs are established and operated under the rules regulation and guidance of Nepal Rastra Bank. Nepal Bank had issued a certain directive to those banks, regarding the mandatory credit accusation to the priority sector, the Nepal Rastra Bank has directed to the government owned banks to invest 3% and the JVBs to invest 0.05% of the total outstanding credit to the priority sector (Economic Report: 1997/98:4).
“HMG’s deliberate policy of allowing foreign JVBs to operate in Nepal in basically targeted to enhance, encourage local traditionally run commercial bank to enhance their bankable capacity through competition efficiency modernization and mechanization via computerization and prompt customer service" (Shrestha, 2047:45).
Now a day there is very much competition in banking market but less opportunity to new opportunities, so that they can survive in the competitive market and earn profit. But investment is very risking job for a purposeful, safe and profitable investment bank must follow sound investment and fund mobilizing policy.
Nowadays there are 27commercial banks operating in Nepali financial market along with 9 joint venture with foreign investors.
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