3.2 Formation, Composition of Banks and Financial Institutions

3.2.1 Commercial Bank A "class A" institution. It accepts demand and time deposits from the public and provides the full range of credit, payment, and trade-finance services. Incorporation under company legislation plus a BAFIA licence — the dual-door rule: corporate form first, banking licence second. 3.2.2 Development Bank A "class B" institution. It finances priority sectors — agriculture, hydropower, tourism, small industry — often with a regional or sectoral focus. Its licence restricts the scope of business compared with commercial banks. 3.2.3 Finance Companies and Co-operatives • Finance companies ("class C") — hire-purchase finance, consumer credit, and deposit taking with narrower limits. • Co-operatives — member-owned savings and credit societies operating under cooperative legislation; where they conduct financial transactions beyond the cooperative framework's scope, the supervisory debate over "bye-bank" cooperatives has been a live policy issue in Nepal.