TyroCity: Banking Notes

IT Policy and Development

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

IT Policy Development in Nepal

Introduce Computer in 2028 BS
Establishment of High Level Commission for Information Technology (HLCIT) in 2051 BS and terminated by Prime minister Baburam Bhattarai
Establishment of National Information Technology Center (NITC) in 2059
IT Policy 2057
IT Policy 2067
IT Policy 2072

Introduction of HLCIT

High Level Commission for Information Technology (HLCIT) is an apex body formed under the chairmanship of Rt. Hon. Prime Minister of Nepal with a view to providing crucial strategic direction and helping formulate appropriate policy responses for the development of ICT sector in the country as well as harnessing these technologies to meet key developmental challenges including governance reform and catalyzing economic growth for poverty reduction. The government of Nepal strongly believes that its efforts in macro economic and governance reform arena stand to benefit immensely from proper harnessing of recent advances in the technological domain notably, Information and Communication Technologies (ICTs). The fact remains however that the technologies on their own devoid of enabling institutional, policy, and regulatory environment will fall short of producing intended developmental outcomes. This clearly defines the context within which National IT Policy and Strategy of the Government of Nepal was announced in the year 2000. These policy provisions lay down a comprehensive framework for the development of IT sector in the country. Among others, the policy envisages the creation of a number of high level institutional entities to provide a direction and leadership for the development of ICT sector in the country.

Functions and Duties of National Information Technology Center

To implement information communication technology related plans and policies.
To assist Nepal Government in all forms of computer related tasks.
To design and launch websites for all Government organizations, and assist in timely manner in maintaining and operating of the same
To administer the development of required coding and standards to engender uniformity in information technology, abide by the same and put it into operation.
To assist in research and development of information communication technology in the country.

Telecom History

A line between Kathmandu and the Indian border was opened in 1914
Major growth in telecom sector in Nepal has occurred after 1995 with World Bank Assistance.
An important milestone was reached in 1999 when tele-density reached one line per 100 inhabitants
Nepal’s pioneer telecommunication’s operator Nepal Telecom has made significant progress in the growth and development of the national public switched telecommunications network (PSTN) during Nepal’s Fifth Phase Telecom Project (1992 97).
Until few years back monopoly of state owned Nepal Telecom (NTC) in all types of telecom service
NTC also started providing GSM mobile service from May 1999
United Telecom Ltd. (UTL) is providing Wireless Local Loop based telecom service inside Kathmandu Valley and other few cities
Spice Nepal (P) Ltd. is providing cellular mobile telephone connections based on GSM from Mid September 2005 inside Kathmandu Valley and other major cities

History of Internet

The Internet was first introduced into Nepal in 1993 in a venture of the erstwhile Royal Nepal Academy of Science and Technology (RONAST) and Mercantile Office Systems (MOS).
Now almost all big cities have Internet facilities with local ISP

IT Policies

IT Policy of Nepal (2057/2067)
IT Policy of Nepal (2015)
NRB Guidelines
NRB IT Policies
Electronic Transaction Act

Fiscal Policy

Banking Notes — Sun, 08 Apr 2012 05:41:42 +0000

Fiscal policy plays an increasingly important role in many developing countries. Decisions on fiscal policy, especially if properly synchronized with monetary policy, can help smoothen business cycles, ensure adequate public investment and redistribute incomes. The four main components of fiscal policy are:

expenditure, budget reform
revenue (particularly tax revenue) mobilization,
deficit containment/ financing and
determining fiscal transfers from higher to lower levels of government.

Fiscal policy works through both aggregate demand and aggregate supply channels. Changes in total taxes and public expenditure affect the level of aggregate demand in the economy, whereas, the structure of taxation and public expenditure affect, among others, the incentives to save and invest (at home and abroad), take risks, and export and import goods and services.

Government’s revenue (taxation) and spending policy designed to

counter economic cycles in order to achieve lower unemployment,
achieve low or no inflation, and
achieve sustained but controllable economic growth.

In a recession, governments stimulate the economy with deficit spending (expenditure exceeds revenue). During the period of expansion, they restrain a fast-growing economy with higher taxes and aim for a surplus (revenue exceeds expenditure). Fiscal policies are based on the concepts of the UK economist John Maynard Keynes (1883-1946) and work independently of monetary policy which tries to achieve the same objectives by controlling the money supply.

Objectives of fiscal policy

Full employment
Price stability
Accelerating the rate of economic development
Optimum allocation of resources
Equitable distribution of income and wealth
Economic stability
Capital formation and growth
Encouraging Investment

Contractionary fiscal policy is when the government either cuts spending or increases revenue through higher taxes. The purpose is to slow growth to a healthy economic level. Although you may think that there’s no such thing as an economy that’s growing too fast, an overheated economy has a lot of negative repercussions. First, it usually creates an asset bubble, similar to what happened to housing industry in 2006. Second, it lowers unemployment to below the natural rate of unemployment. This makes it difficult for employers to find enough workers to meet market demand.

Third, it can create inflation. That’s when prices, and often wages, rise higher and higher. This can destroy savings and your standard of living. Fourth, an economy that’s growing too fast will inevitably burn out, leading to a recession. For more, see Business Cycle.

Contractionary fiscal policy is so named because it actually contracts the economy by reducing the amount of money available for businesses and consumers to spend.

The purpose of contractionary fiscal policy is to cool off growth and prevent inflation. That’s only needed during the peak phase of the business cycle. That’s the only time the government should increase spending beyond the level of revenue it receives. It’s also the only time it should cut taxes below the level needed to support spending.

Expansionary fiscal policy is when the government uses its budgeting tools to provided consumers and businesses with more money. These tools include increased spending, including transfer payments, or tax cuts. It usually uses a combination of all three. In the United States, Congress must generally approve these measures.

Expansionary fiscal policy is so named because it expands the amount of money available for consumers and businesses to spend.

It puts more money into consumers’ hands to give them more purchasing power. It uses subsidies, transfers payments including welfare programs, and income tax cuts. It reduces unemployment by contracting public works or hiring new government workers. All these measures increase demand. That boosts business profit. They use it for new investment and hiring to meet the increased demand.

Fiscal policy is used by elected officials to change the business cycle. Although it can be more powerful than monetary policy, it is rarely used as effectively. That’s because elected officials have different opinions on the best ways to use fiscal policy.

Expansion: When the economy is in the expansion phase, politicians are happy because their constituents are happy. They will pursue other goals, such as foreign policy, defense, or immigration.

Peak: During the irrational exuberance phase, politicians will also ignore fiscal policy. However, this is they should pursue a contractionary fiscal policy to avoid the peak. That means raising taxes and cutting spending. However, since the budget cycle is usually 18 months in the making, by the time the economy reaches the peak, it’s probably too late. In addition, politicians don’t get re-elected by doing either of those things.

Contraction: This is when expansionary fiscal policy is desperately needed. That means cutting taxes and increasing spending to create jobs, demand, and confidence. Find out what are the best unemployment solutions.

Compiled and collected by
Basudev Sharma Poudel(PHD)

Information System

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

Introduction

An Information System is a man made system that facilitates an organization’s operational functions and supports management decision making by providing information that managers can use to plan and control the activities of the firm.

Components of Information System

Management Information System

Functional Areas

Kinds of Information System

Operational Support

Some Questions

What is Information System? Explain with its components.
What is the use of IS in Bank?
Define the term MIS. What are the different types of MIS used in banking system to automate the banking activities?

Database

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

Database
A database is a collection of information that is organized so that it can easily be accessed managed, and updated. In one view, databases can be classified according to types of content: bibliographic, full-text, numeric and images.

Data Storage Hierarchy

Level 0	Bit A	Single binary digit (0 or 1)
Level 1	Character	Multiple related bits are combined to form a character (byte)
Level 2	Field	Multiple related characters are combined to form a field
Level 3	Record	Multiple related fields are combined to form a record
Level 4	Table	Multiple records are combined to form a table
Level 5	Database	Multiple related tables are integrated to form a database

Components of Database System
Users- People who interact with the database:

Application Programmers
End Users
Data Administrators

Software- Lies between the stored data and the users:

DBMS
Application Software
User Interface

Quality of Information

Accuracy
Times
Relevancy
Completeness

Database Application

MS – Access
My-SQL
SQL
Oracle

Why to use DBMS?

Data Independence
Efficient Data Access
Data Integrity
Data Administration
Concurrent Access and Crash Recovery
Reduced Application Development Time

Database Management System

A database management system (DBMS ) is a collection of software programs that allow a user to define the data types, structures, and constraints for the data; construct permanent storage for the data; and manipulate data by query and update operations. In the specific case of relational databases, the database management software is known as a relational database management system RDBMS.

Database Model
A database model is a type of data model that determines the logical structure of a database and fundamentally determines in which manner data can be stored, organized and manipulated. The most popular example of a database model is the relational model, which uses a table based format.

Hierarchical Model
In a hierarchical model, data is organized into a tree like structure , implying a single parent for each record. A sort field keeps sibling records in a particular order. Hierarchical structures were widely used in the early mainframe database management systems.

Network Model
The network model expands upon the hierarchical structure, allowing many to many relationships in a tree like structure that allows multiple parents. It was most popular before being replaced by the relational model.

Relational Model
A relational database contains multiple tables, each similar to the one in the “flat” database model. One of the strengths of the relational model is that, in principle, any value occurring in two different records (belonging to the same table or to different tables), implies a relationship among those two records. A key that can be used to uniquely identify a row in a table is called a primary key. Keys are commonly used to join or combine data from two or more tables.

Object Oriented Model
The object oriented programming paradigm was applied to database technology, creating a new database model known as object databases for storing objects in a database.

Advantages of DBMS

Make an easy to add new data.
Make easy to modify (change) the database.
Make easy to delete existing data.
Organized the data in proper sequence.
It reduces the data redundancy to a large extent.
It can control data inconsistency to a large extent.
Make easy to access the data for the user.
Allow multiple users to be active at one time; data in the database may be shared among several users.
Protecting data against unauthorized access (security).
Allow for growth in the database system.

Disadvantages of DBMS

Complex to understand and implement
Costly
Too many rules
Fast changing technology
Chance of losing the data
Chance of data leakage and hacking
Unavailability of trained manpower.

Data Security

Encryption
Strong User Authentication
Backup Solutions
Firewall

Some Questions

What is Database? What is the use of Database in Bank?
What is Database Management System? What are the different types of Database model?
What types of database model is used on modern banking system? Justify your answer.

मौद्रिक नीति

Banking Notes — Sun, 08 Apr 2012 05:41:42 +0000

मौद्रिक नीति भनेको कुनै पनि मुलुकको सरकार वा मौद्रिक अधिकारीले मुलुकको राष्ट्रिय आवश्यकता अनुसार मुद्राप्रदाय, विनिमयदर, कर्जा प्रवाह, ब्याजदर र मूल्य सम्वन्धमा अपनाउने समष्टिगत नीति हो । अर्को शब्दमा देशको मुद्रा एवं साखको पूर्ति लाई एक निश्चित स्तरमा कायम राख्ने केन्द्रीय वैंकको नीति, मौद्रिक नीति (Monetary Policy) समष्टिगत आर्थिक नीति (Macro-economic Policy) का तीन प्रमुख औजारमध्ये एउटा औजार, यो नीति अर्थतन्त्रमा रहने वा आउने मुद्रासँग सम्बन्धित, अर्थतन्त्रको आवश्यकताअनुसार कुनै अर्थतन्त्रमा मुद्राको स्तर कति रहनुपर्दछ त्यस्तो मुद्रा अर्थतन्त्रको कुन–कुन क्षेत्रमा प्रवाहित वा उपयोग हुनुपर्दछ भनी निर्धारण गर्ने नीति नै मौद्रिक नीति, यस्तो मौद्रिक नीति देशको केन्द्रीय बैंकले तर्जुमा, कार्यान्वयन तथा आवश्यकता अनुसार फेरबदल गर्दछ, त्यसैले कुनै पनि देशको केन्द्रीय बैंकलाई मौद्रिक अधिकारी (Monetary authority) भनिन्छ ।, अधिक मुद्राप्रदाय (Money supply) ले अर्थतन्त्रमा मुद्रा स्फीति (Inflation) बढाउँछ । किनभने मुद्रा र मूल्यबीच सोझो र प्रभावकारी सम्बन्ध हुन्छ । यसरी अर्थतन्त्रमा मुद्राप्रदाय बढी भई मूल्य वृद्धि भएमा त्यसले ब्याज दर घटाउने, कर्जा अधिक मात्रामा बिस्तार हुने, मुलुकको मुद्रा कमजोर हुदै जाने अर्थात् मुद्राको अबमूल्यन हुँदै जाने, निर्यात घट्ने, आयात बढ्ने र अन्ततोगत्वा मुलुकको शोधनान्तर स्थिति प्रतिकूल हँुदै गई विदेशी मुद्राको संचिति रित्तिदै जाने हुन्छ । त्यसैगरी मुद्राप्रदाय आवश्यकताभन्दा न्यून भएमा अर्थतन्त्रमा मूल्य घट्ने (Deflation), ब्याज दर बढ्ने, कर्जा महङ्गो हुन गई संकुचन हुने, मुलुकको मुद्राको पुनर्मूल्यांकन (Revaluation) हुँदै जाने हुन्छ । फलस्वरूप निर्यात घट्ने, आयात बढ्ने र विदेशी मुद्राको संचिति घट्दै जाने हुन्छ । यसरी मुद्राप्रदाय आवश्यकताभन्दा घटी वा बढी जे भए पनि त्यसले अर्थतन्त्रको हित गर्दैन । त्यसैले यसलाई ठीक स्तरमा कायम राख्नुपर्ने हुन्छ । अर्थतन्त्रमा मुद्राकोस्तर कति कायम गर्ने र त्यस्तो मुद्रा के प्रयोजनमा उपयोग गर्ने भन्ने नीति नै मौद्रिक नीति हो ।

मौद्रिंक नीतिका उद्देश्यहरू
मुद्राको अर्थतन्त्रमा गहन भूमिका रहेको हुदा मौद्रिक नीतिका विविध खालका उद्देश्य प्राप्त गर्न विभिन्न मौद्रिक उपकरण मार्फत यस नीतिलाई कार्यान्वयनमा ल्याइन्छः

सामान्यतया मौद्रिक नीतिको उद्देश्यमा अर्थतन्त्रमा विदेशी विनिमयदर र आन्तरिक मूल्य स्थिरता कायम गरी विकास अनुकुल स्थायित्व सृजना गर्नु र अर्थतन्त्रको विकासलाई प्रोत्साहन गर्नु हो ।
मौद्रिक नीतिका उद्देश्य मुलुकको आर्थिक स्थिति, भौगोलिक वनावट, वैदेशिक ब्यापारको स्थिति, उद्योग तथा वाणिज्य क्षेत्रको अवस्था अनुरूप फरक–फरक हुन सक्छन् ।
सामान्यतया मौद्रिक नीतिका निम्न प्रमुख उद्देश्यहरू रहेको पाइन्छ ।

मूल्य स्थिरता वाह्य स्थिरता विनिमयदर स्थिरता आर्थिक विकास आर्थिक वृद्धि रोजगारी सृजना मौद्रिक नीतिले २ काम गर्छ । वर्तमान समयमा कति तरलता छ त्यसको पहिचान गर्ने घटी भए बढाउने, बढी भए Withdraw गर्ने, आबश्यक जतिमात्र कायम गर्ने ।

मौद्रिक उपकरणहरू

केन्द्रीय बैंकले विभिन्न प्रत्यक्ष र अप्रत्यक्ष मौद्रिक उपकरणहरू (Monetary Instruments) प्रयोग गरेर अर्थतन्त्रमा सृजना हुने मुद्रालाई आवश्यकतानुसार घटाउने र बढाउने गर्दछ ।
अर्थतन्त्रमा केन्द्रीय बैंकले मुद्रा प्रदाय घटाउन र बढाउन उपयोग गर्ने उपायहरू वा चाल्ने कदमहरूलाई मौद्रिक उपकरण भनिन्छ ।
निक्षेप र कर्जाको ब्याज दर निर्धारण, क्षेत्रगत कर्जाको सीमा निर्धारण, वाणिज्य बैंकहरूलाई केन्द्रीय बैंकले दिने कर्जा वा पुनर्कर्जाको ब्याज दर (Bank Rate) परिवर्तन, अनिवार्य नगद मौज्दात (Cash Reserve Ratio, CRR) को अनुपात परिवर्तन, अनिवार्य तरलता मौज्दात (Statutory Liquidity Ratio, SLR) को अनुपात परिवर्तन, खुला बजार कारोवार (Open Market Operations) आदि केन्द्रीय बैंकले मुद्रा नियन्त्रण गर्न प्रयोग गर्ने प्रमुख र प्रचलित उपकरणहरू हुन् ।
केन्द्रीय बैंकले वाणिज्य बैंकहरूलाई तरलता वा ब्याजदरका सम्बन्धमा कुनै लिखित निर्देशन जारी नगरी नैतिक दवावको माध्यमबाट पनि ती कुराहरूमा आफूले चाहेको परिवर्तन गराउन सक्तछ । यो पनि मौद्रिक उपकरण नै हो जसलाई Moral Suasion भनिन्छ ।
अर्थतन्त्रमा मुद्रा प्रदाय बढी भई विकृतिहरू देखा परेको अवस्थामा केन्द्रीय बैंकले बैंक दर तथा अनुपातहरू बढाउँछ । ब्याज दर वृद्धिले मुद्रालाई महङ्गो पार्दछ, निक्षेप संकलन बढाउँछ र कर्जा बिस्तारलाई नियन्त्रण गर्दछ भने अनुपातहरूको वृद्धिले बाणिज्य वैंकहरूसँग रहेको तरलतालाई उपयोग गर्न नपाउने वा कर्जा विस्तार गर्न नपाउने गरी घटाउँछ । यी सबै उपायहरूको उपयोग गरेमा अर्थतन्त्रमा तरलता घट्न जान्छ ।
यसरी केन्द्रीय वैंकले अर्थतन्त्रमा मुद्रा प्रदाय घटाउन ब्याज दरहरू र नगद तथा तरलता अनुपातहरू बढायो भने त्यस्तो मौद्रिक नीतिलाई संकूचनकारी (Contractionary) मौद्रिक नीति भनिन्छ भने ब्याज दरहरू र नगद तथा तरलता अनुपातहरू घटायो भने त्यस्तो मौद्रिक नीतिलाई विस्तारकारी (Expansionary) मौद्रिक नीति भनिन्छ ।
खुला बजार कारोवार (Open Market Operations,OMO) अर्थतन्त्रको मुद्रा नियन्त्रण गर्ने अर्को प्रभावकारी मौद्रिक उपकरण हो ।
यस्तो कारोबारमा निर्धारण हुने ब्याज दरले अर्थतन्त्रको मुद्राप्रदाय वा तरलताको स्थितिको बारेमा जानकारी दिन्छ

यो कारोवारमा निर्धारण हुने ब्याजदर क्रमिक रूपमा घट्दै गयो भने त्यसबाट अर्थतन्त्रमा अधिक तरलता छ भन्ने बुझिन्छ र त्यस्लाई केन्द्रीय बैंकले घटाउन चाहन्छ भने उसले खुला बजार कारोबार मार्फत बिक्री हुने सरकारी ट्रेजरी विलको परिमाण बढाई अर्थतन्त्रबाट बढी से बढी तरलता प्रशोचन (Mop Up) गर्दछ । त्यसैगरी यदि यो कारोवारले बढी ब्याज दर निर्धारण गर्दछ वा बढी ब्याज दर पाए मात्र ट्रेजरी बिल खरिद गर्न बाणिज्य वैंकहरू तयार देखिए भने केन्द्रीय वैंकले अर्थतन्त्रमा तरलता कम छ भन्ने बुझ्दछ र उसले अर्थतन्त्रमा बढी तरलता पठाउन (Inject) बढी ब्याज दरमा ट्रेजरी बिलहरू पुनर्खरिद (Repurchase, Repo) गर्दछ वा कम परिमाणमा ट्रेजरी विल बिक्री गर्दछ । यस्तो कारोबारलाई ट्रेजरी विलको दोस्रो बजार (secondary Market) भनिन्छ । नेपालमा यस्तो कारोवार नेपाल राष्ट्र बैंक, राष्ट्र ऋण विभागले २०५० साल देखि सञ्चालन गर्दै आएको छ । यो कारोवार प्रत्येक हप्ताको सोमबारका दिन गर्ने परम्परा छ जसमा प्रत्येक वाणिज्य वैंकहरू सहभागी हुने गर्दछन् । त्यसैले नेपाल राष्ट्र बैंकको लागि मुद्रा नियन्त्रणको यो सशक्त उपकरण भएको छ ।

Compiled and collected by
Basudev Sharma Poudel(PHD)

Windows

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

Introduction
Windows is a personal computer operating system from Microsoft, with some common business applications such as Microsoft Word and Excel has become a de facto “Standard” for individuals in most corporations and home.

Components of Windows

Desktop
Desktop Icons
Start Menu Program
Taskbar
Control Panel
User Management
Device Manager
Programs, etc.

Interface

Some Keyword
Windows Key + R = Run

Windows Key + E = Explorer

Alt + F4 = Close

Run: winword (To open MS Word)

Run: excel (To open MS Excel)

Run: powerpnt (To open MS Power Point)

Run: control (To open Control Panel)

Run: fonts (To open fonts)

Run: dxdiag (To view System Information)

Run: C: (To open C:>)

Run: temp or %temp% ( To view temp. file)

MS-DOS
Run: cmd (To go on Command Mode)

C:> dir (To display the files and folders)

C:> dir/ah (To Display the hidden files and folders)

C:> Date (To View Current Date)

C:> Time (To View Current Time)

C:> MD DN (DN=Directory (Folder) Name, To Create Folder)

C:> CD DN (To Enter inside folder)

C:> CD.. (To exit from folder)

C:> RD DN (To Delete folder)

C:> Copy Con FN (FN=File Name, To Create File) : add some content and save it by pressing ctrl+z and do Enter

C:> Type FN (To open the file)

C:> Edit FN (To edit file)

C:> Del FN (To Delete file)

C:> CLS (To Clear Screen)

C:> ipconfig (To view IP address)

C:> ipconfig/all (To view details of IP address)

C:>D:(To change the drive or path from C:> to D:>)

C:> Exit (To Close Command Mode)

Difference Between GUI and CUI

Some Questions

What do you mean by Windows? What are the components of Windows?
Differentiate between CUI and GUI.

Factor affecting money supply

Banking Notes — Sun, 08 Apr 2012 05:41:42 +0000

The supply of money in a modern economy and financial system is determined by three key factors:

“Open market operations” – this is effectively the same as Quantitative Easing. The Central Bank buys government bonds, effectively creating money
The “reserve requirement” imposed on banks – this is the % of deposits made by customers at the bank that the bank must keep hold of rather than lending it out
The policy interest rate set by the central bank – the rate of interest will influence how many households and businesses are willing and able to borrow. Most money in a modern economy is created by commercial bank lending so the rate of interest ultimately does have a bearing on the supply of money

Key factors affecting the demand for money:

The rate of interest on loans
The number / value of monetary transactions that we expect to carry out
The extent to which we also want to hold other financial assets, such as bonds, property, saving (this is also influenced by the rate of interest) – this is known as the speculative motive for holding money
Changes in GDP
The extent to which it is possible to use debit cards / credit cards i.e. the pace of financial innovation
The extent to which we might have to pay out large unexpected payments, for example, for i.e. the precautionary motive
The rate of anticipated inflation
Inter-bank lending
Money at call
Refinanceable export credits
Commercial bills
Central Government debt: internal considerations
Local authority short-term borrowing

Compiled and collected by
Krishna Prasad Aryal
Assistant Branch Manager
Rastriya Banijya Bank
Branch Office Parasi

Computer Basics Terminology

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

COMPUTER BASICS – TERMINOLOGY

Application– A computer program that does specific tasks such as word processing or spreadsheets.

Bit – Represents a binary digit which is the amount of information obtained by asking a ‘yes’ or ‘no’ question. This is also the smallest unit of information stored on a computer as a 0 or 1.

Blinking Cursor – This is a vertical blinking bar that locates the position on the screen where text can be inserted or deleted. This appears most frequently in text or dialog boxes.

Byte – Data is stored on a computer in Bytes. A byte is one character, which may be a number or letter. A byte is composed of 8 consecutive bits.
1,000 bytes = 1 kilobyte (K or KB)
1,000 KB = 1 megabyte (MB)
1,000 MB = 1 gigabyte (GB)
1,000 GB = 1 Terabyte (TB)

Cache - This is a type of memory and is similar to RAM. Cache is used by the computer to move data between the RAM and CPU.

CD-ROM – A removable disk that stores data. A CD-ROM can only be read. You cannot record (save) data onto one. You may however record (save) onto a CD-Rewritable disk. This is most often called a CD. A CD looks like a music CD, but contains data instead of music.

Computer – A collection of electronic parts that allow software programs to run that perform certain tasks. A computer can accept input, change data, store data and display data.

CPU – The CPU (central processing unit), is the brain of the computer. New Windows-based programs use a Pentium processor primarily.

Cursor – A synonym for the pointer, which is controlled by the mouse. The cursor may take different shapes.

DVD (Digital Versatile Disc) – Technology that store more information than a CD-ROM and can be written upon. The disk resembles a CD-ROM but has approximately seven times the storage capacity.

File – A collection of data with a name.

Flash Drive – This is a small portable hard drive that plugs into a USB port and allows you to transport files between different computers. Also called a thumb drive.

Graphical User Interface (GUI) - A program that helps you more easily work with you operating system and application programs by providing pictures and visual clues to help you work. Windows is the GUI on PCs.

Hand Pointer – The cursor changes into a pointing hand when it passes over a hypertext link. This allows connecting directly to the link.

Hard Drive – The place where programs and files are stored in a computer. Also called the Hard Disc. On PCs this is often the c:// drive.

Hard Disc Space – The amount of permanent storage of data measured in bytes. This storage exists whether the computer is on or off.

Hardware – The physical components of the computer. They usually include the; monitor, printer, mouse, keyboard and modem.

Hourglass – This is the symbol that indicates the computer is working to retrieve or send data or locate a webpage.

Hypertext Link – These links are clicked on as text, images or files that open another web page.

Text Hyperlinks are often a different color than the words around them.

I Beam – As the cursor moves over text, the pointer will change into an ‘I.’ This facilitates word processing and copying text. See Blinking Cursor.

I or │

Keyboard – Similar in part to a typewriter keyboard, this is used to key (type) in commands, text and data.

Memory (RAM) – The amount of temporary storage that you can use at one time. Memory stores ends when the computer is shut down. This is the reason that you save work before turning off the computer. Data is saved from RAM to the computer or onto a storage unit, such as a CD.

Modem – This is a way to transfer data through a telephone or cable line generally by the Internet. It may be internal or external. Some modems are used to fax or act as answering machines.

Monitor – Similar to a television screen, the monitor allows you to see the data on your computer.

Motherboard – The circuit board that functioning parts of the computer connect to is the motherboard. The CPU, RAM and cache all plug into the motherboard.

Mouse – A hand-operated device to control the cursor on the screen. The mouse for PCs has two buttons. The button is usually clicked once to select an item on the screen. Double-clicking the left button opens windows or programs.

Multitasking – This describes the ability to do more than one thing at a time. For computer use this means that you may have more than one program open at time in the memory, but only one program can actually be fully active. Inactive programs can be processing data or doing other tasks in the background.

Network – A group of two or more computers linked together.

NIC (Network Interface Card) – A card is put in the computer allowing connection to a network.

Operating System – Directs the computer how to operate. It acts as a mediator between the hardware and the application programs that are used for work. This allows access to computer files, loads application programs into memory and closes programs.

Peripheral – This describes anything that can be attached to the computer input ports, such as; the keyboard, printer, mouse, external modem, scanner or external hard drive.

Pointer – The cursor is a symbol that moves across the screen to identify location. The cursor appears as a pointer when it is moving across a page and not on text.

Port – Connection on the computer that allows input devices like monitors, disk drives, the mouse, or keyboards. Common ports are serial for connecting a modem or a mouse, USB for connecting a scanner, digital camera, Ethernet ports for connecting to a network, and audio in/out ports for connecting to headphones or a microphone.

RAM – See Memory

Resolution – The degree of sharpness, or clarity or what is seen on a computer screen. The resolution is measured by the number of dots (pixels) of color that are displayed across and down the screen. As resolution increases, the size of the characters and images gets smaller, but sharper.

Scanner – A peripheral device that can copy documents, pictures or photographs directly into the computer converting the images into digital files. Images may then be stored or manipulated (changed).

Software – These are the programs (applications) that allow the computer to operate or do certain tasks.

Sound Card – This device allows the computer to reproduce music, sounds and voices. The computer needs a sound card to hear the audio portion of web sites or often to play multimedia games.

Thumb Drive – See Flash Drive

USB Port – The Universal Serial Bus is accessed through small rectangular port on the front or back of computer that allows peripheral devices such as digital cameras and external hard drives to connect to the computer. See Ports for other types of connections.

Video Card – This allows images to be sent to the monitor.

IT and ICT in Banking

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

IT and ICT in Banking

ICT has become an indispensable factor in the modern life of every individual. The elements of information and communication technology related sources are perceived as essential parameters in day today operation of banking both in private and public nature while deal with customers and stakeholders. The applications of ICT are augmenting in every sphere of our action includes both consumption and services. In this aspect the banking service is an intangible element which requires an effective quality delivery process from the ends of both provider and taker. In order to enhance the quality of banking services both in private and public categories, the application of ICT becomes an imperative element. But today banking organization from both private and public background aims to offers better and enhanced services to the customer in the given sphere of competition. Due to the level of service extended by bank differs based on the customer and type of services with respect to availability of infrastructure. Even though the banks from private and public base aims to elevate sophisticated services towards the perception of customers and employees in order to identify the role of ICT towards effective services of banking sectors. The present survey has been conducted from 3 private and 4 public banks situated in Kanchipuram Town. The results have been evaluated using SPSS 18.0 and suggestions provided to improve the better applications of ICT resources.

Role of Information Technology (IT) in the Banking Sector

Banking environment has become highly competitive today. To be able to survive and grow in the changing market environment banks are going for the latest technologies, which is being perceived as an ‘enabling resource’ that can help in developing learner and more flexible structure that can respond quickly to the dynamics of a fast changing market scenario. It is also viewed as an instrument of cost reduction and effective communication with people and institutions associated with the banking business.

The Software Packages for Banking Applications in India had their beginnings in the middle of 80s, when the Banks started computerising the branches in a limited manner. The early 90s saw the plummeting hardware prices and advent of cheap and inexpensive but high powered PC’s and Services and banks went in for what was called Total Branch Automation (TBA) packages. The middle and late 90s witnessed the tornado of financial reforms, deregulation globalisation etc. coupled with rapid revolution in communication technologies and evolution of novel concept of convergence of communication technologies, like internet, mobile/cell phones etc. Technology has continuously played on important role in the working of banking institutions and the services provided by them. Safekeeping of public money, transfer of money, issuing drafts, exploring investment opportunities and lending drafts, exploring investment being provided.

Information Technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets. Internet has significantly influenced delivery channels of the banks. Internet has emerged as an important medium for delivery of banking products and services.

The customers can view the accounts; get account statements, transfer funds and purchase drafts by just punching on few keys. The smart card’s i.e., cards with micro processor chip have added new dimension to the scenario. An introduction of ‘Cyber Cash’ the exchange of cash takes place entirely through ‘Cyber-books’. Collection of Electricity bills and telephone bills has become easy. The upgradeability and flexibility of internet technology after unprecedented opportunities for the banks to reach out to its customers. No doubt banking services have undergone drastic changes and so also the expectation of customers from the banks has increased greater.

IT is increasingly moving from a back office function to a prime assistant in increasing the value of a bank over time. IT does so by maximizing banks of pro-active measures such as strengthening and standardising banks infrastructure in respect of security, communication and networking, achieving inter branch connectivity, moving towards Real Time gross settlement (RTGS) environment the forecasting of liquidity by building real time databases, use of Magnetic Ink Character Recognition and Imaging technology for cheque clearing to name a few. Indian banks are going for the retail banking in a big way

The key driver to charge has largely been the increasing sophistication in technology and the growing popularity of the Internet. The shift from traditional banking to e-banking is changing customer’s expectations.

E-Banking:

E-banking made its debut in UK and USA 1920s. It becomes prominently popular during 1960, through electronic funds transfer and credit cards. The concept of web-based baking came into existence in Eutope and USA in the beginning of 1980.

In India e-banking is of recent origin. The traditional model for growth has been through branch banking. Only in the early 1990s has there been a start in the non-branch banking services. The new pribate sector banks and the foreign banks are handicapped by the lack of a strong branch network in comparison with the public sector banks. In the absence of such networks, the market place has been the emergence of a lot of innovative services by these players through direct distribution strategies of non-branch delivery. All these banks are using home banking as a key “pull’ factor to remove customers away from the well entered public sector banks.

Many banks have modernized their services with the facilities of computer and electronic equipments. The electronics revolution has made it possible to provide ease and flexibility in banking operations to the benefit of the customer. The e-banking has made the customer say good-bye to huge account registers and large paper bank accounts. The e-banks, which may call as easy bank offers the following services to its customers:

Credit Cards/Debit Cards
ATM
E-Cheques
EFT (Electronic Funds Transfer)
DeMAT Accounts
Mobile Banking
Telephone Banking
Internet Banking
EDI (Electronic Data Interchange)

Benefits of E-banking:

To the Customer:

Anywhere Banking no matter wherever the customer is in the world. Balance enquiry, request for services, issuing instructions etc., from anywhere in the world is possible.
Anytime Banking – Managing funds in real time and most importantly, 24 hours a day, 7 days a week.
Convenience acts as a tremendous psychological benefit all the time.
Brings down “Cost of Banking” to the customer over a period a period of time.
Cash withdrawal from any branch / ATM
On-line purchase of goods and services including online payment for the same.

To the Bank:

Innovative, scheme, addresses competition and present the bank as technology driven in the banking sector market
Reduces customer visits to the branch and thereby human intervention
Inter-branch reconciliation is immediate thereby reducing chances of fraud and misappropriation
On-line banking is an effective medium of promotion of various schemes of the bank, a marketing tool indeed.
Integrated customer data paves way for individualized and customized services.

Impact of IT on the Service Quality:

The most visible impact of technology is reflected in the way the banks respond strategically for making its effective use for efficient service delivery. This impact on service quality can be summed up as below:

With automation, service no longer remains a marketing edge with the large banks only. Small and relatively new banks with limited network of branches become better placed to compete with the established banks, by integrating IT in their operations.
The technology has commoditising some of the financial services. Therefore the banks cannot take a lifetime relationship with the customers as granted and they have to work continuously to foster this relationship and retain customer loyalty.
The technology on one hand serves as a powerful tool for customer servicing, on the other hand, it itself results in depersonalising of the banking services. This has an adverse effect on relationship banking. A decade of computerization can probably never substitute a simple or a warm handshake.
In order to reduce service delivery cost, banks need to automate routine customer inquiries through self-service channels. To do this they need to invest in call centers, kiosks, ATM’s and Internet Banking today require IT infrastructure integrated with their business strategy to be customer centric.

Impact of IT on Banking System:

The banking system is slowly shifting from the Traditional Banking towards relationship banking. Traditionally the relationship between the bank and its customers has been on a one-to-one level via the branch network. This was put into operation with clearing and decision making responsibilities concentrated at the individual branch level. The head office had responsibility for the overall clearing network, the size of the branch network and the training of staff in the branch network. The bank monitored the organisation’s performance and set the decision making parameters, but the information available to both branch staff and their customers was limited to one geographical location.

Traditional Banking Sector

The modern bank cannot rely on its branch network alone. Customers are now demanding new, more convenient, delivery systems, and services such as Internet banking have a dual role to the customer. They provide traditional banking services, but additionally offer much greater access to information on their account status and on the bank’s many other services. To do this banks have to create account information layers, which can be accessed both by the bank staff as well as by th customers themselves.

The use of interactive electronic links via the Internet could go a ling way in providing the customers with greater level of information about both their own financial situation and about the services offered by the bank.

The New Relationship Oriented Bank

Impact of IT on Privacy and Confidentiality of Data:

Data being stored in the computers, is now being displayed when required on through internet banking mobile banking, ATM’s etc. all this has given rise to the issues of privacy and confidentially of data are:

The data processing capabilities of the computer, particularly the rapid throughput, integration, and retrieval capabilities, give rise to doubts in the minds of individuals as to whether the privacy of the individuals is being eroded.
So long as the individual data items are available only to those directly concerned, everything seems to be in proper place, but the incidence of data being cross referenced to create detailed individual dossiers gives rise to privacy problems.
Customers feel threatened about the inadequacy of privacy being maintained by the banks with regard to their transactions and link at computerized systems with suspicion.

Aside from any constitutional aspect, many nations deem privacy to be a subject of human right and consider it to be the responsibility of those who concerned with computer data processing for ensuring that the computer use does not revolve to the stage where different data about people can be collected, integrated and retrieved quickly. Another important responsibility is to ensure the data is used only for the purpose intended.

THE IMPACT OF INFORMATION AND COMMUNICATIONS TECHNOLOGY IN BANKING SECTOR INTRODUCTION There are so many definitions of a bank given by various authorities.But,summarizing all the definitions,a bank is simply a financial institution that accepts deposits from surplus economic units of the society and advances it to deficit units through the process of financial intermediation.Banks are the institutions that assist in managing financial system of a country.The financial systems are the totality of financial arrangement,agents,institutions etc that interact with each other and the rest of the world to develop,foster and enhance economic growth and development of a country.A robust financial sytem is very vital to the health of any economy.(Ekezie,1997).So the role banking institutions play cannot be over emphasized.And that is why any thing that affects the institution has both local and international consequences.The effective regulation of this institution helps the government to manage the monetary,political,and fiscal policies of the nation. There are divergents views on the impact of Information,Communication and Technology (ICT)in the banking sector as we have seen in our earlier discussions.Some of my colleaques agreed with me that ICT have impacted greatly the banking sector,while others disagree on the grounds that ICT have created some distortions by replacing human capital with machine capital so to say(example in comments made by Anthony). Some believe that the advantages far out weigh the disadvantages(example in comments made by Segun).Much as it has put a lot of people out of job,at the same time it has contributed significantly to creation of jobs.One can easily see examples among the likes,of VODACOM,MTN,AIRTEL,ETISALAT,IBM,FACEBOOK,MICROSOFT,HP,APPLE,SAMSU

NG,etc. Again many agreed that other employment opportunities abound in other sectors like agriculture,manufact uring,construction,etc,can be exploited by those affected(example in comments made by Loretta).The botton line being that one should equip himself or herself with others skills and knowledge as adaptive measures. Some believe that ICT is a welcome development in the banking industry or sector and there is no going back.That was why Paul O’Neil Chairman and CEO of Alcoa once said that “I don’t see information technology as a stand alone system.I see it a great facilitator.”(Bill,1999) LITERATURE REVIEW The arguments or controversies whether the ICT have made impact in the banking sector or not is still on going.While some agree,some others disagree each school of thoughts have their own points to back up their claims.Bill Gates in his book ‘Businees @ the speed of thought ‘likened the way businesses are carried out in this generation like digital nervous system.At the click of a botton,the response rate is unimaginable.(Bill,1999).In the banking sector,the speed of revolution in bank processes via ICT is such that people are wondering whether robots will not take over the banking operations soonest. A lot of research is still going on and the kind of competition taking place in telecommunications sector is amazing.A new invention quickly become obsolete in just a matter of two(2) to three(3) years as a result of fast development.Many banks are constantly upgrading their software.A case in point is First Bank Plc which recently upgraded their software from finnacle 7 to finnacle 10.This development disrupted the normal banking operation for 3 days.About four(4)years ago finnacle 7 was taken to be a robust software capable of supporting any large data base.Other banks are equally upgrading their various softwares every now and then.Nigeria like many countries have been making effort through many policies and strategies to accelerate the pace of economic and infrastructural development.To achieve this,a number of factors are involved including entrepreneurship,good corporate governance,competent management systems, modern techniques and application of information and communications technology(ICT).(Ekezie,1997). DISCUSSION The banking industry or sector provides financial services to individuals,organizations,institutions etc and have been totally revolutionized by the impact of Information and Communications Technology(ICT) in virtually all areas of its operations.Many years ago a lot of tasks were carried out manually.These include,preparation of cashbooks,journals,general ledgers,final accounts and reports.These however accounted to greater extent the long delays in providing financial services to customers,long queues experienced in banking halls,long turnaround time in meeting customers requests like cheque books requisition, raising drafts, processing of loan requests,withdrawal/deposit of cash,trade payments etc But today,the story have changed significantly due to the impact of Information and Communication Technology.Unlike before where you have many paying and receiving tellers in the banking hall, you have fewer tellers nowadays and many Automated Teller Machines(ATM) in many strategic locations both within and outside bank premises.These days many banks even have e-branches and ATM galleries with highly reduced human activities.Loan processing have equally improved.Approvals can be obtained from various approving authorities via computer system. The clearing system of bank instruments like,cheques,managers cheque,bank drafts, etc have been reduced from four(4) working day to two(2) with chances of further improvement.In security area, electronic revolving doors have practically replaced the manually operated types.Surveillance cameras of various types are in vogue.Computerized system of monitoring custom duties,excise duties,import duty,movement and payment of goods,taxes is now the order of the day.Today in Nigeria financial inclusion strategy appears to be gaining ground.These involves using electronic means including handsets to facilitate payment of goods and services especially in areas that were not exposed to bank services.This strategy assists in mobilizing money that was not in the banking system.Thus improving the workability of monetary policy of the government.The various banking software being used in the banking system have further improved the processes of generating reports ,accounting,internal controls,human resource management,corporate governance and other processes in the system.The notable softwares include finnacle,globus,phoenix,bankmaster,etc.Internet banking services have greatly contributed in revolutionizing the banking sector.The internet creates a new universal space for information sharing,collaboration,and commerce.(Bill,1999).Today through the platform(internet) you can easily pay your utility bills,recharge your cards,transfer funds to various accounts,make payments with your electronic cards in commercial websites and you can even open accounts without necessarily going to the banking hall (GTB).Also,you can request for cheque books and stop your cheques through the internet and using your internet enabled handsets a good number of banking applications can be done.The list is endless so to say and more innovations are still on their way. However,the impact of information and communications technology have not been without its challenges.So many people have lost their jobs because of the replacement of some tasks and services by machines and computer systems.The unemployment situation have worsened such that,the percentage of unemployed youths have risen to worrisome level.Some banks have reduced the number of their branches as a result of improvement in technology.Banks like GTbank Plc and Zenithbank Plc have some branches with greater part of their operations carried out by machines and computer system.The cost of deploying the technology have impacted negatively to the profitability figures of many banks.As at today some banks are still behind others in competition because of associated cost of deploying some of the machines,computer systems and other electronic channels.The structure of banking halls are now different from what we used to know before.The computer systems,machines and other tools used are now more effectively, efficiently and strategically deployed to enhance banking operations. Many changes are still very much on their way and the impact will continue. SUMMARY Summarising the discussion above,one can see that ICT have totally revolutionized the banking industry or sector and thereby changing the manner business is conducted nowadays.There is virtually no unit that does not have ICT innovations.And the situation will continue many years to come.The effect or impact have the positive side of it as well as the negative side as we can deduced from the discussion.Whichever school of thought you belong,it is obvious that there is a cause and effect situation.No doubt,the arguments,discussions,debates etc will still continue because researches,experiments etc are still on and the results will in one way or the order affect the sector positively or negatively.The solution to its negative impact still remain in my own mind in development of oneself in other skill of human endeavour by way of seminars, training, workshops,formal and non formal education,specialized training programs,conferences etc such that you can easily adapt to changes when the need arise. CONCLUSION In conclusion, the impact of Information and Communications Technology in banking sector is enormous and has global impact.It has equally affected leading organizations all over the world.The effect is not only in the banking sector because virtually all sectors of human endeavour have experienced the revolution.Again,the speed of change is fast and in many years to come the impact will continue to cut across all areas of human endeavour going by the Research and Development(R&D) taking place all over the world presently.Change is a constant phenomenon and banking sector is not exempted.As such one needs to prepare himself or herself to such changes whenever the situation calls for it.

IT Policy of Nepal and NRB

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

IT Policy of Nepal (2057/2067)
Objectives

To make information technology accessible to the general public and increase employment through this means.
To build a knowledge based society.
To establish knowledge based industries.

IT Policy

To declare information technology sectors a prioritized sector.
To follow a single door system for the development of information technology.
To prioritize research and development of information technology.
To create a conducive environment that will attract investment in the private sector, keeping in view the private sector’s role in the development of information technology.
To provide internet facilities to all Village Development committees of the country in phases.
To render assistance to educational institutions and encourage native and foreign training as a necessity of fulfilling the requirement of qualified manpower in various fields pertaining to information technology.
To computerize the records of each governmental office and build websites for them for the flow of information.
To increase the use of computers in the private sector.
To develop physical and virtual information technology park in various places with the private sector’s participation for the development of information technology.
To use information technology to promote e commerce, e education, e health, among others, and to transfer technology in rural areas.
To establish National Information Technology Centre.
To establish a national level fund by mobilizing the resources obtained from His Majesty’s Government, donor agencies, and private sectors so as to contribute to research and development of information technology and other activities pertaining to it.
To establish venture capital funds with the joint participation of public and private sectors.
To include computer education in the curriculum from the school level and broaden its scope.
To establish Nepal in the global market through the use of information technology.
To draft necessary laws that provides legal sanctions to the use of information technology.
To gradually use information technology in all types of governmental activities and provide legal sanctions to its uses in such activities.

IT Policy of Nepal (2072)

Human Resource
ICT in education, research & development
Promoting public access and content development
Developing the ICT Industry Sector
ICT for Government service innovation and good governance
ICT in SMEs & promotion of e- Commerce
Telecommunications Infrastructure
Convergence of Telecommunications, ICTs and broadcasting
ICT in Agriculture
ICT in Health
ICT in Tourism
Telecommunication and ICTs in mitigating the impact of Climate Change
ICT in Environment and natural resources
Telecommunications/ICTs for natural disaster preparedness, mitigation and relief
Human Exposure to electromagnetic fields and safe disposal of electronic waste
Conformance, Interoperability and Standards
in Telecommunications/ICTs
Cloud Computing
Access to Telecommunications/ICTs for rural and remote areas
Access to Telecommunications/ICTs services for persons with disabilities and specific needs
ICTs for Youth, women and girls
Building Confidence and Security in the use of ICTs

NRB IT Policies (2068)

Ensure efficient, effective and economic IT operation by implementing appropriate IT System
Maintain well structured, secured physical layout of its IT infrastructure with proper documentation
Maintain multilevel security for Information
Implement IT system audit
Develop, implement and maintain data backup and recovery policy
Establish and maintain efficient, effective and economic Disaster Recovery (DR) System as an instrument to “Fail Safe System” with minimum down time. Also, develop and maintain Business Continuity Plan (BCP)
Develop and implement IT Outsourcing and Third Party involvement mechanism
Maintain uniform and legitimate IT infrastructure in all its offices
Provide IT directives to licensed Banks and Financial Institutions
Set a standard for IT procurement and shall be reviewed based on technological development
Promulgate “NRB IT Code of Conduct” for proper usage of NRB IT resources
Strengthen IT capacity building of employee

NRB Guidelines (2012)

IT Governance
Information Security
Information Security Education
Information Disclosure and Grievance Handling
Outsourcing Management
IT Operations
Information Systems Acquisition, Development and Implementation
Business Continuity And Disaster Recovery Planning
IS Audit
Fraud Management

Electronic Transaction Act (2063/2064)
Procedures of Electronic Record and Generation and Security of Digital Signature

To Certify Electronic Record
Verification of Digital Signature
Secured Electronic Signature and Record
Quality Standard Concerning Information Technology to be maintained by the Certifying Authority
Receipt of Acknowledgement of Electronic Record
Time of Receipt of the Electronic Record

Some Questions

What are the major focuses of IT Policy of Nepal Government?
List and explain the IT Guidelines of Nepal Rastra Bank (NRB).
What are the major focuses of IT Policy of NRB ?

Questions & Answers
Explain the development of IT policy in Nepal and highlight the current status of IT in Nepal.

Current Status:

Banking and Tele Communication Industry are moving towards to
Automation
The Government including Ministries are prioritizing usage of IT and ICT
to their daily work
Government has introduced e Governance system to the public like as:
Smart License System, National Identity Card, Digitization of Land and mapping system, etc.
The concept of SMART City is emerging
Universities are prioritized their teaching and learning methodologies
through IT and ICT
In other service sector like as Hospital, Home Ministry, Health Ministry prioritizing to use the IT and ICT.
Software companies are emerged and developed
So on……

What are the significant amendments made in the IT policy 2072 from IT policy 2067.

Explain the major provisions of IT policy in Nepal and suggest some improvement to be done in such policies

Suggestions
i) Deployment
ii) Implementation
iii) Evaluation time to time

Objectives or Goals of Monetary Policy

Banking Notes — Sun, 08 Apr 2012 05:41:42 +0000

The following are the principal objectives of monetary policy:

Full Employment: Full employment has been ranked among the foremost objectives of monetary policy. It is an important goal not only because unemployment leads to wastage of potential output, but also because of the loss of social standing and self-respect.
Price Stability: One of the policy objectives of monetary policy is to stabilize the price level. Both economists and laymen favor this policy because fluctuations in prices bring uncertainty and instability to the economy.
Economic Growth: One of the most important objectives of monetary policy in recent years has been the rapid economic growth of an economy. Economic growth is defined as “the process whereby the real per capita income of a country increases over a long period of time.”
Balance of Payments: Another objective of monetary policy since the 1950s has been to maintain equilibrium in the balance of payments.

Instruments of Monetary Policy: The instruments of monetary policy are of two types: first, quantitative, general or indirect; and second, qualitative, selective or direct. They affect the level of aggregate demand through the supply of money, cost of money and availability of credit. Of the two types of instruments, the first category includes bank rate variations, open market operations and changing reserve requirements. They are meant to regulate the overall level of credit in the economy through commercial banks. The selective credit controls aim at controlling specific types of credit. They include changing margin requirements and regulation of consumer credit. We discuss them as under:

Bank Rate Policy
The bank rate is the minimum lending rate of the central bank at which it rediscounts first-class bills of exchange and government securities held by the commercial banks. When the central bank finds that inflationary pressures have started emerging within the economy, it raises the bank rate. Borrowing from the central bank becomes costly and commercial banks borrow less from it.

The commercial banks, in turn, raise their lending rates to the business community and borrowers borrow less from the commercial banks. There is a contraction of credit and prices are checked from rising further. On the contrary, when prices are depressed, the central bank lowers the bank rate.

It is cheap to borrow from the central bank on the part of commercial banks. The latter also lower their lending rates. Businessmen are encouraged to borrow more. Investment is encouraged. Output, employment, income and demand start rising and the downward movement of prices is checked.

Open Market Operations:

Open market operations refer to sale and purchase of securities in the money market by the central bank. When prices are rising and there is need to control them, the central bank sells securities. The reserves of commercial banks are reduced and they are not in a position to lend more to the business community.

Further investment is discouraged and the rise in prices is checked. Contrariwise, when recessionary forces start in the economy, the central bank buys securities. The reserves of commercial banks are raised. They lend more. Investment, output, employment, income and demand rise and fall in price is checked.

Changes in Reserve Ratios
This weapon was suggested by Keynes in his Treatise on Money and the USA was the first to adopt it as a monetary device. Every bank is required by law to keep a certain percentage of its total deposits in the form of a reserve fund in its vaults and also a certain percentage with the central bank.

When prices are rising, the central bank raises the reserve ratio. Banks are required to keep more with the central bank. Their reserves are reduced and they lend less. The volume of investment, output and employment are adversely affected. In the opposite case, when the reserve ratio is lowered, the reserves of commercial banks are raised. They lend more and the economic activity is favorably affected.

Selective Credit Controls

Selective credit controls are used to influence specific types of credit for particular purposes. They usually take the form of changing margin requirements to control speculative activities within the economy. When there is brisk speculative activity in the economy or in particular sectors in certain commodities and prices start rising, the central bank raises the margin requirement on them.

The result is that the borrowers are given less money in loans against specified securities. For instance, raising the margin requirement to 60% means that the pledge of securities of the value of Rs 10,000 will be given 40% of their value, i.e. Rs 4,000 as loan. In case of recession in a particular sector, the central bank encourages borrowing by lowering margin requirements.

Compiled and collected by
Basudev Sharma Poudel(PHD)

Monetary Policy

Banking Notes — Sun, 08 Apr 2012 05:41:42 +0000

Definition: Monetary policy is how central banks manage the money supply to guide healthy economic growth. The money supply is credit, cash, checks, and money market mutual funds. The most important of these is credit, which includes loans, bonds, mortgages, and other agreements to repay. Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.

In Nepal, monetary policy of the Central Bank of Nepal is aimed at managing the quantity of money in order to meet the requirements of different sectors of the economy and to increase the pace of economic growth.

The NRB implements the monetary policy through open market operations, bank rate policy, reserve system, credit control policy, and moral persuasion and through many other instruments. Using any of these instruments will lead to changes in the interest rate, or the money supply in the economy. Monetary policy can be expansionary and contractionary in nature. Increasing money supply and reducing interest rates indicate an expansionary policy. The reverse of this is a contractionary monetary policy.

For instance, liquidity is important for an economy to spur growth. To maintain liquidity, the NRB is dependent on the monetary policy. By purchasing bonds through open market operations, the RBI introduces money in the system and reduces the interest rate.

Central banks have three main tools of monetary policy: open market operations, the discount rate, and a bank’s reserve requirement. However, most banks have many more at their disposal. Here’s what they are, and how they all work together to sustain healthy economic growth.

1. Open Market Operations

Open market operations are when central banks buy or sell securities from the country’s banks. When the central bank buys securities, adds cash to the banks’ reserves. This gives them more money to lend more. When the central bank sells the securities, it simply places them on the banks’ balance sheets and reduces its cash holdings. The bank now has less to lend. A central bank buys securities when it wants expansionary monetary policy, and sells them when it executes contractionary monetary policy.

2. Reserve Requirement
The reserve requirement refers to the deposit a bank must keep on hand overnight, either in its vaults or at the central bank. A low reserve requirement allows the banks to lend more of their deposits. That is expansionary because it creates more credit. A high reserve requirement is contractionary since it gives banks less money to lend. It’s especially hard on small banks since they don’t have as much to lend in the first place. Central banks rarely change the reserve requirement because it’s expensive and disruptive for member banks to change their procedures.

3.
Instead, central banks are more likely to adjust their targeted lending rate because it achieves the same result. The Fed funds rate is perhaps the most well-known of these tools. Here’s how it works. If a bank can’t meet the reserve requirement, it borrows from another bank that has excess cash. The interest rate it pays is the Fed funds rate. The amount it borrows is called the Fed funds. The Federal Open Market Committee (FOMC) sets a target for the Fed funds rate at its meetings.
Central banks have several tools to make sure the Fed funds rate meets that target. The Federal Reserve, the Bank of England, and the European Central Bank pay interest on the required reserves and any excess reserves. Bank won’t lend Fed funds for less than the rate they’re receiving from the Fed for these reserves. Banks also use open market operations.

4. Discount Rate
The discount rate is the third tool. It’s the rate that central banks charge its members to borrow at its discount window. Since the rate is higher, banks only use this if they can’t borrow funds from other banks.

How It Works
Central bank tools work by increasing or decreasing total liquidity. This includes both the total amount of capital available to invest or lend, as well as money to spend. In other words, it’s more than the money supply, which consists of M1, (currency and check deposits) and M2 (money market funds, CDs and savings accounts plus M1). Therefore, when people say that central bank tools affect only the money supply, they are understating the impact.

Compiled and collected by
Basudev Sharma Poudel(PHD)