American International Journal of Humanities and Social Science (AIJHSS)

Commercial banking industry in Nepal occupies a dominant role in the financial system and it is contributing to the economy by channeling credit and other services. This paper descriptively examines the role of commercial banking industry in the financial sector's development and economy of Nepal. It finds the role of commercial banks in the financial sector of developing countries like Nepal in two folds. Firstly, despite the problem of non-performing loans, banking credit to the economy is promoting financial sector to develop it in a competitive environment. Secondly, commercial banking activities are promoting various sectors of the economy through supplying loans under the central bank and the government policies such as priority sector lending and the deprived sector lending policies. These policies are playing a major role to channel bank credit contributing to promote the backward sectors such as agriculture and other sectors of the economy. Similarly, the government’s deficit financing policy is also helping to channel bank activities in order to boost the financial system in one hand; and banking activities under this policy is contributing to the economy of Nepal on the other hand.