Development Bank

The bank which facilitates the economic sectors such as industrial, agricultural, rural, etc. by providing capital and technical assistance for their development is known as a development bank. They mainly fulfil a financial, administrative and technical requirement for the development of infrastructure facilities like transportation, electricity, communication, health, education, agriculture, industry, and mining in the country.

The oldest development bank named Societe Generale de Belgique was established in 1822 AD in Belgium. In Nepal, development banks are established under the provision of Development Bank Act, 2052 A.D. Nepal Industrial Development Corporation (NIDC), Agricultural Development Bank and other private development banks already have been established in Nepal under this Act.

Functions of Development Bank

The functions performed by the development banks are divided into the following two groups:

Development Functions

1. Establishment of industries, promotion and research of technology
   The development bank looks forward to the technology required for the new industries, analyses the market, identifies the priority sector, and provides managerial and administrative skill and knowledge. It helps in collecting capital and establishing such new industries in the feasible locations.
   
   
2. Helps an industrial organization
   Development bank helps the industries directly or indirectly for the preparation of plans and policies and implementing. It also helps to manage capital items like land, furniture, vehicle, machinery, etc. as well as raw materials required for the smooth running of the industries.y
   
   
3. Identifies priority sector
   Development bank identifies and selects the priority sector of the country. After selecting them, it provides the necessary resources to carry out the selected development works.
   
   
4. Maintains proper environment for investment
   Development Bank encourages and attracts national and international investors. For this, it maintains a proper environment for investment and gives the guarantee of security for their investment.
   
   
5. Analysis of product
   Development Bank analyses the possible market in the agricultural and industrial sectors before launching the product. It analyses the product considering the availability of resources, labours, market, condition, product demand, transportation, etc. After these analyses, it provides information to the public.

Banking Functions

1. Grants loan
   It provides short-term, mid-term, and long-term loans in agricultural and industrial sectors against the security deposit. It grants a loan to purchase improved seeds, fertilizers, agricultural tools, machinery and equipment as well as to expand and develop industries.
   
   
2. Remits money

   

   
   Development bank helps in remittance of money which is its important functions. It issues bank draft, letter of credit, telegraphic transfer (TT), credit cards, etc. for remittance of money from one place to another.
   
   
3. Accepts deposits
   It accepts the deposits from various sources and public under the current account, saving account and fixed deposit account. It also provides withdrawal facilities to its depositors. It utilizes such deposits in development sectors like agriculture, industries, trade, etc.
   
   
4. Purchases and sales of shares and debentures
   The shares, debentures, bill of exchange, etc. issued by different industries are purchased and sold by development bank. In case of a bill of exchange, the concerned party should pay its value within 3 months.
   
   
5. Serving with agency functions
   The agency function performed by a development bank are payment to the creditors, water and electricity bills, subscription, insurance premium, etc. and collection from debtors, receiving dividends, interest and commission, etc. on the behalf of the clients as per outstanding instructions.