One-third of the existing bank branches are serving only the population of the valley while far flung districts are devoid of the service. There are 659 branches of financial institutions operating in the capital, while nationwide commercial banks, finance companies and development banks are operating through 2463 branches, as of mid-October. In Kathmandu district, there are 507 branches, and in Lalitpur and Bhaktapur, there are 104 and 48 branches, respectively.

A report published by the central bank has depicted that Kathmandu valley dominates more than 60 per cent of the total business of financial institutions. Since the prospect for garnering more business exists in the valley, opening branches in the capital makes more sense than to go to remote areas.

"Though concentrating in the capital alone might be profitable for financial institutions in the short run, they have to expand their working area to be sustainable in the long run," said spokesperson for Nepal Rastra Bank (NRB) Bhaskar Mani Gyanwali. In Kathmandu district one branch serves 3,440 people but in Bajhang one branch provides service to 97,580 people. Since the valley is a financial hub of the country, the presence of financial institutions is also high.

However, the financial exclusion arising due to the absence of formal banking services has emerged as a challenge for the central bank. One of the primary objectives of NRB is to increase the outreach of financial services to all the citizens.

In the absence of formal financial services, the poor have been facing a difficult time. The absence of savings means they do not have a contingency fund, while the absence of proper lending channels means they have no option but to borrow from local money lenders which further deteriorates their financial situation. Poverty alleviation and access to finance go hand in hand.

"In order to compel financial institutions to venture into remote areas, NRB has directed them to open one branch outside the Kathmandu valley and one in any of the 30 districts that are recognised by NRB as deprived of any banking facilities, for them to be eligible to open a branch in the valley," he added.

Microfinance institutions are considered the answer to promote financial access to people with low income. However, their progress is also snail paced. There are 32 commercial banks, 19 national level development banks, 11 development banks serving four to 10 districts, 41 development banks serving one to three districts, and 19 development banks that can operate in one district. Likewise, there are 60 national level `C' class finance companies, four finance companies serving one to three districts, and three finance companies providing services in one district.