In a broad sense financial institutions include all the institutions engaged in the business of financial intermediation between depositors and borrowers. In other words, financial institutions are said to be the bridge between the savers and the users. On the other words, they collect scattered deposits and give loans to maximize their wealth. They are the organizations that deal with transaction of financial claims and financial assets. Financial institution refers to any institutions established with the objective of providing loan to agriculture, co-operative, industry or any other specific economic sector or accepting deposits from the general public. The term also refers to any other institution called financial institution by HMG/N by publishing a notice in Nepal Gazette.
According to Gurley, J.N. and Shaw E.S., “Financial Institutions are interposed between the ultimate borrowers and lenders to acquire the primary securities of the borrowers and provide other securities for the portfolio of lenders.”
Likewise, in the words of Urant A.T.K., “Financial Institutions are investment intermediaries linking the savers and users of capital.”
Financial Institutions can be classified into:
Banking
It refers to Commercial Bank, Development Bank, etc
Non-Banking
It refers to Finance companies, Co-operatives, Companies entitled to collect savings (Employees Welfare Fund and Insurance Companies), Postal Savings, NGO’s authorized for limited banking activities etc
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