3.2 Formation, Composition of Banks and Financial Institutions

3.2.1 Commercial BankA "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 BankA "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.