Welcome to Chapter Two of my internship report, where I dive deeper into my immersive experience at Machhapuchchhre Bank Limited (MBL) Itahari Branch. This chapter unveils the realities and insights gained during my time as an intern, providing a firsthand account of the dynamic environment and professional growth within the banking industry.
In Chapter One, I introduced the significance of internships and my initial impressions of joining MBL Bank's Itahari Branch. Now, in Chapter Two, I invite you to join me on a captivating journey as I share the challenges faced, lessons learned, and personal milestones achieved during my internship at MBL Bank Itahari Branch. Get ready to explore the inner workings of the bank, the invaluable mentorship received, and the transformational impact of this experience on my professional development.
Note: For complete thesis in word format, comment down your email Id or mail us on techpro450@gmail.com.
CHAPTER TWO
2. BRIEF INTRODUCTION OF THE INDUSTRY
2.1 The Context
The word "bank" is presumably derived from
the French word "banque" or the old Italian word "banca,"
both of which denote a bench or a money exchange table. In the past, European
money lenders or money changers would place large piles of coins from various
nations on benches or tables for landing or exchanging.
A bank is an establishment for the custody of money,
received from or on behalf of each customer. Essential duty is to pay their
draft on each profit area from its use of the money left unemployed by them.
(Oxford Dictionary)
Bank is a financial institution, which provides
financial services that may be in the form of accepting deposits, advancing
loan, providing necessary technical advises, dealing overt foreign currencies,
remitting funds, etc (Nepal Rastra Bank Act 2002)
Banking plays a crucial role in the economy by
providing a range of financial services that enable individuals and businesses
to save, borrow, and invest. Banks also play a critical role in facilitating
the flow of money and credit within an economy, which can stimulate economic
growth. In addition, banks are an important source of financing for
governments, businesses, and individuals, which can help fund investments and
drive innovation. Finally, banks provide a secure and convenient way for people
to store and access their money, which can help promote financial stability and
security.
2.2 History of Banking
The concept of banking has a long history dating back
to ancient civilizations. In ancient Mesopotamia and Egypt, for example, people
deposited valuable items such as grain and precious metals with temples and
palaces, which served as safekeeping places and also provided a form of credit.
The modern concept of banking as we know it today began to emerge in medieval Europe, with the development of organized systems for the safekeeping and transfer of money. One of the earliest known banks was the Bank of Venice, which was established in 1157 and issued the first known banknotes. Over time, banks have evolved to offer a wide range of financial services beyond just the safekeeping and transfer of money. These services include accepting deposits, making loans, issuing credit cards, providing investment products, and facilitating electronic payment systems. In the 20th century, the banking industry underwent significant changes with the rise of central banks, the development
BRIEF INTRODUCTION OF THE INDUSTRY
2.1 The Context
The word "bank" is presumably derived from the French word "banque" or the old Italian word "banca," both of which denote a bench or a money exchange table. In the past, European money lenders or money changers would place large piles of coins from various nations on benches or tables for landing or exchanging.
A bank is an establishment for the custody of money, received from or on behalf of each customer. Essential duty is to pay their draft on each profit area from its use of the money left unemployed by them. (Oxford Dictionary)
Bank is a financial institution, which provides financial services that may be in the form of accepting deposits, advancing loan, providing necessary technical advises, dealing overt foreign currencies, remitting funds, etc (Nepal Rastra Bank Act 2002)
Banking plays a crucial role in the economy by providing a range of financial services that enable individuals and businesses to save, borrow, and invest. Banks also play a critical role in facilitating the flow of money and credit within an economy, which can stimulate economic growth. In addition, banks are an important source of financing for governments, businesses, and individuals, which can help fund investments and drive innovation. Finally, banks provide a secure and convenient way for people to store and access their money, which can help promote financial stability and security.
2.2 History of Banking
The concept of banking has a long history dating back to ancient civilizations. In ancient Mesopotamia and Egypt, for example, people deposited valuable items such as grain and precious metals with temples and palaces, which served as safekeeping places and also provided a form of credit.
The modern concept of banking as we know it today began to emerge in medieval Europe, with the development of organized systems for the safekeeping and transfer of money. One of the earliest known banks was the Bank of Venice, which was established in 1157 and issued the first known banknotes. Over time, banks have evolved to offer a wide range of financial services beyond just the safekeeping and transfer of money. These services include accepting deposits, making loans, issuing credit cards, providing investment products, and facilitating electronic payment systems. In the 20th century, the banking industry underwent significant changes with the rise of central banks, the developmen of modern financial instruments such as stocks and bonds, and
the growth of global financial markets. Today, the banking industry plays a
central role in the global economy and is an essential component of modern
financial systems. (https://www.investopedia.com/articles/07/banking.asp) (11/01/2023)
The history of banking in
Nepal is believed to be started from the time of Prime Minister Ranoddip Singh
in 1877 A.D. he introduced many financial and economic reforms. The
TejarathaAdda was established at that time and its basic purpose was to provide
credit facilities to the general public with low interest rate. The
TejarathAdda disbursed credit to the people on the basis of collateral of gold
and silver. TejarathaAdda extended credit only; it did not accept deposits from
the public.
The real banking started
with the establishment of Nepal Bank Limited in 1994 B.S which was founded by
JuddaSamsher. It was the first bank of Nepal. Its main function was
to provide loans and accept deposits. With the development of the banking
sector and to help the government, formulate monetary policies, Nepal Rastra
Bank was set up in Baisakh 14 2013 B.S.as the central bank of the country. Then
after, several commercial banks have been established recent years. (source:https://en.wikipedia.org/wiki/History_of_banking)
(11/01/2023)
The NRB was responsible
for regulating the country's monetary policy and financial system. As the name suggests commercial banks had to carry out
commercial transactions. But commercial banks had to carry out the functions of
all types of financial institutions. So, the Industrial Development Corporation
(IDC) was set up in 2013 BS. The Agriculture Development Bank Limited (ADBL)
was established to provide finance for agricultural producers so that
introducing modern agricultural productivity.
In the 1990sNepal began
to liberalize its economy, which included the privatization of state-owned banks
and the opening of the banking sector to foreign investors. As a result, a
number of private banks and foreign banks entered the Nepali market, increasing
competition and bringing new technologies and practices to the country.
(Source: https://blog.khalti.com/fintech-trends/brief-history-of-banking-in-nepal/)(11/01/2023)
The creation of Bitcoin,
the first decentralized money in history, marked the beginning of
cryptocurrencies. Since then, cryptocurrency's value has surged and it has been
dubbed "digital gold" among its users. The fundamental concept behind
cryptocurrency was to establish a safe and anonymous mechanism to transmit
money from one person to another.
To support the currency's
secrecy, Satoshi Nakamoto, a software developer who goes by the alias
Blockchain, had to invent something new. As a result, Blockchain, a digital log
of Bitcoin transactions, was born. Soon after, a real-time gross settlement
mechanism called Ripple was unveiled. The currency itself is designed to make
it possible for money to be transferred between parties directly and very
instantly. (https://www.cavendishprofessionals.com/the-evolution-of-cryptocurrency/)(11/01/2023)
2.3 Present Situation
The banking industry has experienced enormous growth in Nepal since democracy was restored. The government's initiatives for economic and financial reform have led to a growth in the number of banks and the services they provide. As a way to better serve customers and improve service delivery, banks are rapidly converting to IT-based solutions. The necessity for clients to visit banks has been reduced as a result ofBanks are rapidly realizing that excellent customer service is one of
the differentiating traits that banks may leverage to gain a competitive edge
in today's competitive banking industry. Since the majority of banks provide
comparable offerings and services, they should always look for ways to gain a
competitive edge that will draw in new clients and keep existing ones.
Therefore, banks are striving to provide cutting-edge services and products to
maintain high standards of client care while still continuing to be profitable.
As more businesses enter the market, competition in the banking sector has
undoubtedly increased.
The banking business is under intense competition in the current
environment. Over the years, the level of competitiveness has grown
significantly. This has led to several issues in the banking industry. Some are
in the process of merging, while others are in the situation of being
insolvent. Numerous issues with their functioning are being caused by the
political climate, the governments and NRB's shifting laws and regulations. Few
banks are establishing themselves in the market by giving customers protection
and confidence. There are now 22 commercial banks, 17 development banks, 17
finance companies, and 64 microcredit development banks operating in Nepal as
of Jan 2023. For the benefit of the Nepalese people and the growth of the
Nepalese economy, all of these financial institutions are performing well.
2.4 Challenges and Opportunities
With time, the banking sector worldwide has
grown to a new level. The workings of the bank were established and
administered in a methodical manner as technology advanced. Customers' trust
and faith in the banker's customer service methods have grown, enabling them to
interact with the institution. However, new possibilities and problems have
evolved as a result of changes in time, technology, and competition. On the
other hand, a significant number of large and small businesses, particularly
SMEs, Banks and Financial Institutions (BFls), or other participants in the
financial sector find themselves in deeper difficulties due to the
unprecedented crisis of the COVID-19 pandemic and the Russia and Ukraine war.
2.4.1 Global Challenges of Banking Industry
There are several global challenges currently facing the banking industry,
including:
Increasing regulatory
requirements: Governments
around the world are implementing stricter regulatory requirements for banks in
an effort to increase transparency and reduce the risk of financial crises.
This can be costly and time-consuming for banks to comply with.
Cybersecurity threats: With the increasing reliance on technology in the
banking industry, there is a growing threat of cyber attacks. These attacks can
result in the loss of sensitive customer data and financial losses for banks.
Competition from fintech
companies: The rise of
fintech companies has introduced new competition for traditional banks. Fintech
companies often offer innovative financial products and services that can be
more convenient and cheaper for customers.
Low interest rates: Low interest rates, which are often set by central
banks, can make it difficult for banks to generate profits from traditional
lending activities.
Economic and political
uncertainty: Economic and
political uncertainty in various regions can lead to market volatility, which
can affect the stability and profitability of banks.
Managing customer
expectations: With the
increasing use of digital channels, customers expect a high level of
convenience and personalized service from their banks. This can be challenging
for banks to deliver.
2.4.2 National Challenges of Banking Industry
There are several challenges facing the banking system in Nepal,
including:
Limited financial inclusion: Many people in Nepal, particularly those in rural
areas, do not have access to formal financial services. This limits their
ability to save, borrow, and invest, and can contribute to economic inequality.
Weak regulatory framework: Nepal's regulatory framework for the banking sector
has been criticized as weak and ineffective. This can create risks for banks
and customers, and can hinder the development of a stable and efficient
financial system.
High levels of non-performing
loans: Non-performing
loans, which are loans that are not being repaid, can be a significant burden
for banks. In Nepal, the level of non-performing loans is high, which can
affect the stability and profitability of banks.
Limited access to credit: Many businesses and individuals in Nepal struggle to
access credit from formal financial institutions. This can limit their ability
to invest and grow.
Political instability: Nepal has a history of political instability, which
can create uncertainty and hinder the development of the country's economy and
financial system.
Lack of infrastructure: The lack of infrastructure in Nepal, particularly in
rural areas, can make it difficult for banks to reach and serve customers
effectively.
2.4.3 Global opportunities
The banking sector faces a wide range of difficulties. However, these
difficulties provide opportunity for innovators. Everything, from the
difficulty of satisfying investor expectations to fraud, can be dealt with
after the current market demands are satisfied. It appears to be about
participating in the technological or digital revolution. High-end technology
may simplify the process of preserving correct customer data protection and
that connected with service optimization.
There are several global opportunities currently facing the banking
industry, including:
The shift to digital: The increasing use of digital technology presents
opportunities for banks to improve customer experiences, increase efficiency,
and reduce costs.
Emerging markets: Many emerging markets are seeing strong economic
growth, which can create opportunities for banks to expand and serve the
growing number of consumers and businesses in these markets.
Partnerships and
collaborations: Banks can
explore partnerships and collaborations with fintech companies and other
organizations to offer new and innovative financial products and services.
opportunity for banks to differentiate themselves and build trust with
stakeholders by demonstrating their commitment to these issues.
Managing customer data: As customers increasingly share personal data with
banks, there is an opportunity for banks to use this data to offer personalized
and targeted financial products and services. However, it is important for
banks to manage customer data responsibly and in accordance with relevant
regulations and guidelines.
2.4.4 National opportunities
Nepal is a developing country, and several initiatives are launched to
boost the local economy. Bank loans are important sources of investment in this
setting. Banks compete fiercely for clients, which allows them to provide
customers services that are unique. With the advent of e-banking and mobile
banking, commercial banks are now engaged in healthy rivalry. Most banks
provide their clients cutting-edge remittance options.
In case of Nepalese banking industry, there are various opportunities
that can be grabbed by the banks. There are several
opportunities for the banking industry in Nepal, including:
Increased
access to financial services: As more people in Nepal
gain access to formal financial services, banks and other financial
institutions will have the opportunity to serve a larger customer base.
Growth
in the economy: As the Nepali economy grows and develops,
the demand for financial services, such as loans, will likely increase. This
presents an opportunity for banks to expand their business and increase
profits.
Technological
advancements: As the banking industry in Nepal becomes
more technologically advanced, banks will have the opportunity to offer more
modern financial services, such as online banking and mobile banking, which can
improve customer convenience and increase efficiency.
initiatives present
opportunities for banks to take advantage of government support and expand
their operations.
Increasing
foreign investment: As foreign investment in Nepal increases,
banks will have the opportunity to access new technologies and capital, which
can help them expand and improve their operations.