Chapter I 1. Introduction: 1.1 Background The banking system needs an effective as well as pragmatic laws, the role of effective banking system is a must because without the effective banking system there will be no efficient investment policy in the country. Due to open market philosophy and less intervention of government in the economy the private sector are activated by the government to invest in the areas where the government sees the potentiality. Thus the role of banking in the economy is a must. In this context in each country there is provision for the central bank to look after the economic activities as well as to make the smooth functioning of the banking system in the country. Therefore the central bank has many functions to do for continuous development of the economy. However in the context of developing country the role and function of the central bank is very crucial due to many causes. In the context Nepal the function of central bank has played crucial as well as vital role. As Nepal's......

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