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Nepal Rastra Bank Act, 2058 (2002)


Published: 2002

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Nepal Rastra Bank Act, 2058 (2002)
Nepal Rastra Bank Act, 2058 (2002)
Date of Authentication and publication
17 magh 2058 (January 30, 2002)
Act No.15 of the year of 2058 (2002)
An Act to Provide for Establishment of Nepal Rastra Bank to carry out the
Functions of the Central Bank
Preamble: Whereas, it is expedient to establish a Nepal Rastra Bank
to function as the Central Bank to formulate necessary monetary and
foreign exchange policies, to maintain the stability of price, to
consolidate balance of payment for sustainable development of the
economy of Nepal, and to develop a secure, healthy and efficient
system of payment; to appropriately regulate, inspect and supervise in
order to maintain the stability and healthy development of banking and
financial system; and for the enhancement of public credibility
towards the entire banking and financial system of the country.
Now, therefore, be it enacted by Parliament in the first year of reign of
His Majesty the King Gyanendra Bir Bikram Shah Dev.
Chapter-1
Preliminary
1. Short Title and Commencement: (1) This Act may be called "Nepal
Rastra Bank Act, 2058 (2002)".
(2) This Act shall come into force immediately.
2. Definition: Unless the subject or context otherwise requires, in this Act,
(a) "Bank" means the Nepal Rastra Bank established under Section 3.
(b) "Board" means the Board of Directors of the Bank constituted under
Section 14.
(c) "Director" means a member of the Board and this expression also
includes the Governor and Deputy Governors.
(d) "Governor" means the Governor of the Bank appointed
under Section 15.
(e) "Deputy Governor" means the Deputy Governor of the Bank
appointed under Section 16.
(f) "Commercial Bank" means a commercial bank established under the
prevailing laws.
(g) "Financial Institution" means a financial institution established
under the prevailing laws with the objectives of providing loans for
agricultural cooperative, industrial or any other specific economic
purpose or of collecting deposits from the general public and this
expression also includes an institution prescribed as financial
institution by Government of Nepal upon publishing notice in the
Nepal Gazette.
(h) "Money" means all types of currency notes, postal orders, postal
notes, money orders, cheques, drafts, traveller's cheques, letters of
credit, bills of exchange, promissory notes and credit cards and this
expression also includes similar types of monetary instruments as
the Bank may prescribe, as per the requirement, through the
publication and transmission of public notice.
(i) "Currency Note" means the bank note in circulation in the form of
cash and this expression also includes coin.
(j) "Foreign Currency" means the currency other than the Nepalese
currency and this expression includes the special drawing rights on
the International Monetary Fund, the Asian Currency Units, the
European Currency Units and other instruments as the Bank may
prescribe, as per the requirement, by publication and transmission of
public notice.
(k) "Nepalese Currency" means the currency of Nepalese rupee
denomination.
(l) "Convertible Foreign Currency" means the foreign currency, which
have been prescribed by the Bank as convertible foreign currency,
as per the requirement, by publication and transmission of public
notice.
(m) "Foreign Exchange" means foreign currency, all types of deposits,
credits, stocks, foreign securities payable in foreign currencies and
the cheques, drafts, traveller's cheques, electronic fund transfer,
credit cards, letters of credit, bills of exchange, promissory notes in
international circulation payable in foreign currencies; and this
expression also includes whatsoever, type of other monetary
instrument as the Bank may prescribe, as per the requirement, by
publication and transmission of public notice.
(n) "Foreign Exchange Transaction" means the acts of purchase and
sale of foreign exchange or the acts of borrowing, giving credits,
and of accepting or providing foreign exchange in any manner
whatsoever, and this expression also includes the act of granting
approval for foreign exchange by the Bank.
(o) "License holder" means an individual, firm, company or institution
that has obtained license from the Bank for foreign exchange
transaction.
(p) "Letter of credit" means an instrument issued by a bank to another
bank instructing to accept cheque, draft, hundi or bill of exchange
drawn by specified person up to the limit of specified amount.
(q) "Securities" means share, stock bond, debenture, debenture stocks
issued by any corporate body or a certificate of unit saving scheme
or collective saving scheme (mutual fund) or transferable certificate
of deposit issued by a corporate body in accordance with laws, and
this expression also include the securities or receipt of deposit
(pledge) of such securities, and interest in securities prescribed by
Government of Nepal upon publishing notification in the Nepal
Gazette.
(r) "Negotiate" means the act of transferring an instrument to any
person having the right to hold negotiable instruments enabling
him/her to become a bearer.
(s) "Negotiable Bill of Exchange" means letter of credit, bill of
exchange or cheques.
(t) "Bill of Exchange" means an unconditional order in writing,
addressed by one person to another, signed by the person giving it,
requiring the person to whom it is addressed to pay on demand, or at
a fixed or determinable future time, a sum certain in money to or to
the order of a specified person or to bearer.
(u) "Promissory note" means an instrument signed by a person with an
undertaking to pay, without any condition, a fixed amount to any
particular person referred to in such instrument or to the person
ordered by such person or to the bearer of such instrument on a
fixed date or on demand.
(v) "Cheque" means a bill of exchange drawn on any bank ordering it to
make payment on demand.
(w) "Credit" means a direct or indirect promise to invest money and the
right to recover such amount of investment in return and the interest
of such credit or payment of other charges, the refinance given
against the security of credit or investment restructuring and renewal
of credit, the guarantee made for repayment of credit or any other
promise for such repayment, and this expression also includes any
type of debt.
(x) "Account" means the record, registers and books to be maintained as
per prevailing laws to keep the record of transactions, and this
expression also includes other documents to prove the said
transactions.
(y) "Credit security,” means any bill of exchange of indebtedness and
any other instrument equivalent to such instruments of indebtedness,
whether in certified or in book entry form.
(z) "Monetary liability" means the bank notes and coins in circulation
existing in the balance sheet of the Bank.
(aa) "International Account Standard" means the account standard of
international level.
(ab) "Employee" means a person holding a post in the Bank an
individual presently employed in any post of the Bank.
(ac) "Prescribed" or "as prescribed" mean prescribed or as prescribed in
the Rules or Bye-laws framed under this Act.

Chapter - 2
Establishment, Objectives and Functions, Duties and Powers
3. Establishment of the Bank: (1) There shall be a Central Bank
established in the name as NEPAL RASTRA BANK in order to carry out
the functions of Central Bank.
(2) The Nepal Rastra Bank established under the Nepal Rastra Bank
Act, 2012 (1955) shall be deemed to have been established under this Act.
(3) The Bank shall be an autonomous and corporate body with
perpetual succession.
(4) There shall be a separate seal for transaction of
business of the Bank.
(5) The Bank may, subject to this Act, acquire, utilize, retain, sell
and otherwise dispose of or manage movable and immovable property.

(6) The Bank may sue in its name and the Bank may also be sued in
the same name.
(7) The Central office of the Bank shall be located at Kathmandu
and the Bank may open branch, sub-branch and other offices at any place
within and outside Nepal and appoint agent or representative as per its
requirement.
4. Objectives of the Bank: (1) The objectives of the Bank shall be as
follows:-
(a) To formulate necessary monetary and foreign exchange
policies in order to maintain the stability of price and balance
of payment for sustainable development of economy, and
manage it;
(b) To promote stability and liquidity required in banking and
financial sector;
(c) To develop a secure, healthy and efficient system of
payment;
(d) To regulate, inspect, supervise and monitor the banking and
financial system; and
(e) To promote entire banking and financial system of the Nepal
and to enhance its public credibility.
(2) The Bank shall, without any prejudice to the objectives referred
to in Sub-section (1), extend co-operation in the implementation of the
economic policies of Government of Nepal.
5. Functions, Duties and Powers of the Bank: (1) In order to achieve the
objectives referred to in Section 4, the functions, duties and powers of the
Bank shall be as follows:
(a) To issue bank notes and coins;
(b) To formulate necessary monetary policies in order to
maintain price stability and to implement or cause to
implement them;
(c) To formulate foreign exchange policies and to implement or
cause to implement them;
(d) To determine the system of foreign exchange rate;
(e) To manage and operate foreign exchange reserve;
(f) To issue license to commercial banks and financial
institutions to carry on banking and financial business and to
regulate, inspect, supervise and monitor such transactions;
(g) To act as a banker, advisor and financial agent of
Government of Nepal;
(h) To act as the banker of commercial banks and financial
institutions and to function as the lender of the last resort;
(i) To establish and promote the system of payment, clearing
and settlement and to regulate these activities; and
(j) To implement or cause to implement any other necessary
functions which the Bank has to carry out in order to achieve
the objectives of the Bank under this Act;
(2) While exercising the powers conferred by this Act or any other
prevailing law, the Bank shall have power to carry out other functions and
take actions, which are incidental thereto.
(3) No one shall violate powers conferred on the Bank under this
Act.
6. Prior Right of the Bank: (1) For the purpose of recovering any :
loan, which the Bank has given to any borrower or any other type of claim
of the Bank against any borrower, the Bank shall have prior right of
security over cash deposited in an account in the name of such borrower at
the Bank or in any commercial bank or financial institution or against any
other movable and immovable property owned by the borrower for the
purpose of recovering such loan.
(2) The Bank shall recover its loan by taking into its custody the
cash or movable or immovable property having its prior right and selling
such property as prescribed.
7. Functions not to be Carried out by the Bank: (1) Except otherwise
provided for in this Act, the Bank shall not carry out the following
functions:-
(a) Providing any loan, accepting any type of deposit or making
any type of financial gift;
(b) Purchasing shares of any commercial bank, financial
institution, public corporation or a company or acquiring any
type of proprietary right in any financial, commercial,
agricultural, industrial or other institution;
(c) Carrying out any type trade; and
(d) Acquiring right over movable and immovable property by
way of purchase, lease or in any manner whatsoever.
Provided that the Bank may acquire such property as required
for carrying out its function or for achieving its objectives.
(2) Notwithstanding anything contained in Sub-section (1), the Bank
may carry out the following functions: -
(a) To provide loan to and invest in the shares of the
institutions which carry out the functions helpful in
carrying out the function of the Bank or in attaining
its objectives, not exceeding ten percent of the total
capital of such institutions.
Explanation: For the purpose of this Clause,
"institutions which carry out the functions which
are helpful in carrying out the functions of the
Bank or in attaining its objectives" means any
institutions, companies which are exclusively
engaged in evaluating, managing, protecting the
security, restructuring and transferring the
securities of commercial banks or of financial
institutions, carry out the function of credit
rating, exchange of credit information, process
and transmit data, print financial instruments,
clearing payments, liquidate property, produce
bank notes and coins and act as trustee and any
other institution or companies established for
carrying out similar function and prescribed by
the Bank.
(b) To provide loan to its own employees.
8. Privileges and Facilities to the Bank: Notwithstanding anything
contained in the prevailing laws, the Bank shall be entitled to the following
privileges and facilities: -
(a) Exemption from all types of taxes, fees and charges on
the incomes, capital transactions, houses, land, assets
etc.;
(b) No requirement for the payment of registration fee for
registration of the deeds of loan or refinance to be given
by the Bank;
(c) No requirement of revenue stamps on any of the
documents relating to the Bank;
(d) There would be no tax, fee, charge, duty on the export
and import of bank notes, coins, gold, silver and the
paper, metal, chemicals, and other materials to be used
for printing bank notes and minting coins.
9. Relation between Government of Nepal and the Bank: Any contact
by Government of Nepal with the Bank and by the Bank with Government
of Nepal under this Act, shall be made through the Ministry of Finance.
10. Coordination with Public Bodies: (1) The Bank may, in order to
achieve its objectives, make necessary coordination with public bodies or
their agencies or their organs.
(2) The Bank shall, on the request made by Government of Nepal,
provide necessary information on the balance of payment, banking and
financial matters.
(3) Government of Nepal, public bodies and the private sector shall,
in the event of request made by the Bank, provide necessary information on
economic and financial matters.
11. International Cooperation and Relationship: (1) The Bank shall
represent Nepal in international organizations and associations on the
matters within the jurisdiction of working areas of the Bank such as
monetary policy, foreign exchange policy, and the balance of payment,
bank supervision and other related matters.
(2) The Bank may provide the services of banking and payment to
foreign government, foreign central banks, foreign bank and international
organizations, or associations, and obtain similar type of facilities from
them.
(3) The Bank shall take part in international organizations or
associations working for the financial and economic stability through
international monetary cooperation.
(4) The Bank, while taking part in international organizations or
association as a representative of Nepal, shall assume the responsibility and
undertake the functions to be carried out on behalf of the country.
12. Flow of Public Information: The Bank shall publish and transmit, on
regular basis, the information on the data based analysis conducted by it on
macro economy, development of financial market, monetary circulation,
price stability, balance of payment and foreign exchange etc.
13. Operation of Accounts: The Bank may open and operate account for
Government of Nepal and other governmental bodies, commercial banks
and financial institutions, public corporations, foreign diplomatic missions,
foreign central banks, foreign banks and international organization,
associations. The procedures for opening and operating such accounts shall
be as prescribed by the Bank.
Provided that, the Bank shall not operate account for any individual,
industry and political organization.
Chapter -3
Formation of Board and Functions, Duties and Powers
14. Formation of the Board: There shall be a Board of Directors in
the Bank consisting of the following members:-
(a) Governor -Chairperson
(b) Secretary, Ministry of Finance -Member
(c) Two Deputy Governors -Member
(d) Three Directors appointed by the
Government of Nepal from amongst
the persons renowned in the fields of
Economic, Monitory, Banking, Finance
and Commercial Law -Member
15. Appointment of the Governor: (1) Government of Nepal, the Council of
Ministers shall appoint Governor on the basis of the recommendation of
the Recommendation Committee formed pursuant to Sub-section (2).
(2) Government of Nepal, the Council of Ministers shall, for the
appointment of Governor, form a Recommendation Committee as follows:-
(a) Minister of Finance -Chairperson
(b) One person from among the former Governors - Member
(c) One person designated by Government of
Nepal from amongst the persons renowned in
the fields of Economic, Monitory, Banking,
Finance and Commercial Law. -Member
(3) While making recommendation for the appointment of Governor,
the committee formed pursuant to Sub-section (2), shall recommend to
Government of Nepal, the Council of Ministers the names of three persons
renowned in the field of economic, monetary, banking, finance, commerce,
management, commercial law and from among the Deputy Governors.
(4) Government of Nepal, the Council of Ministers shall, out of the
names recommended pursuant to Sub-section (3), appoint one person to the
Office of Governor.
16. Appointment of the Deputy Governor: (1) Government of Nepal, the
Council of Ministers shall, on the recommendation of the Governor,
appoint Deputy Governor.
(2) The Governor shall, while making recommendation for
appointment of Deputy Governor pursuant to Sub-section (1), recommend
names, double in number of the post falling vacant from among the special
class officers of the Bank on the basis of their performance and capability.
(3) Person appointed in the post of Deputy Governor under this
Section shall be deemed to have been automatically retired from the service
of the Bank.
17. Appointment of the Directors: (1) Government of Nepal, the Council of
Ministers shall appoint Directors.
(2) Government of Nepal, the Council of Ministers shall, while
appointing Directors, appoint them each representing different sectors from
amongst the persons renowned in economic, monetary, banking, financial,
commercial, management and commercial law sectors.
18. Tenure of Office of the Directors: (1) The tenure of Office of the
Governor, Deputy Governor and Directors shall be of five years.
(2) Government of Nepal may, reappoint the retiring Governor for
one term and the retiring Directors for any term, if it is deemed necessary.
19. Remuneration and other Benefits of the Directors: The
remuneration and other benefits of the Governor, Deputy Governor and
Directors shall be as prescribed by the Board.
20. Qualifications of the Directors: In order to be appointed to the post of
Governor, Deputy Governor and Directors, a person shall have to meet the
following qualifications:-
(a) A Nepalese citizen;
(b) Having higher moral character;
(c) Having work experience in economic, monetary,
banking, financial and commercial law sectors after
having attained at least master's degree in economics,
monetary, banking, finance, commerce, management,
public administration, statistics, mathematics and law.
Explanation:- For the purpose of this Clause, "work
experience" means the experience of works in the post
of special class of Government of Nepal or of the Bank
or in the post of a university Professor or in the post of
Executive Chief of class 'A' of a commercial bank or of
a financial institution or in the equivalent post or in the
post higher than those in terms of the order of protocol.
(d) Not disqualified under Section 21.
21. Disqualification of the Directors: None of the following persons shall
be eligible for appointment to the Office of the Governor, Deputy
Governor and Director:-
(a) Member or official of a political party, or
(b) The person blacklisted in relation to transaction
with a commercial bank or financial institution, or
(c) An official currently engaged in any commercial
bank or financial institution, or
(d) A person having five percent or more shares or
voting right in a Commercial Bank or financial
institution, or
(e) A person rendered bankrupt for being unable to pay
debts to creditors, or
(f) A insane person, or
(g) A person convicted by a court in an offence
involving moral turpitude.
22. Grounds for Removable of the Directors from Office: (1)
Government of Nepal, the Council of Ministers shall remove the Governor,
Deputy Governor and Director on conditions stipulated under Sub-section
(5).
Provided that Government of Nepal shall not deprive the concerned person
from a reasonable opportunity to defend himself/herself prior to remove
him/her from his/her office.
(2) Government of Nepal shall, remove the Governor from his office
pursuant to Sub-section (1), on the recommendation of an inquiry
committee constituted under Section 23.
(3) While removing a Director or Deputy Governor pursuant to Sub-
section (1), Government of Nepal shall cause to conduct an inquiry by
committee and remove him/her from the office on the basis of the
recommendation made by the committee.
(4) Once Government of Nepal initiates the process for removing the
Governor, Deputy Governor and Director pursuant to Sub-section (1), they
shall be deemed to have been ipso facto suspended from the office.
(5) The Governor, Deputy Governor and Director shall be removed
from the office on any of the following grounds:-
(a) If one is disqualified to become a Director pursuant to
Section 21; or
(b) The lack of capability to implement or cause to
implement the functions which the Bank has to carry out
in order to achieve the objectives of the Bank under this
Act; or
(c) If one has committed any act causing loss and damage
to the banking and financial system of the country; or
(d) If one is found to have acted dishonestly or with mala
fide intention in any transaction related to the business
of the Bank; or
(e) If professional license is revoked or prohibited from
carrying out any profession rendering disqualified to be
engaged in any trade or profession on the ground of
gross misconduct; or
(f) If one is absent for more than three consecutive meeting
of Board without a genuine reason;
(6) Except on the grounds referred to in Sub-section (5), no
Governor, Deputy Governor and Director shall be removed from office.
23. Constitution, Functions and Duties of Inquiry Committee: (1)
Government of Nepal shall, prior to removing the Governor from office
under Sub-section (2) of Section 22, constitute an Inquiry Committee
consisted as follows, and remove the Governor from the Office on the basis
of the recommendation of such committee:-
(a) The person designated by Government of Nepal from
amongst the retired Justices of the Supreme Court -
Chairperson;
(b) Two persons designated by Government of Nepal from
amongst renowned persons belonging to economic,
monetary, banking, financial, commercial or management
sectors - Member
(2) The Inquiry Committee may, prior to submission of its
recommendation to Government of Nepal along with its findings, record
the statement and conduct inquiry with, the concerned person.
(3) The Inquiry Committee may fix its procedure to be followed in
connection with the inquiry.
(4) The Inquiry Committee shall submit its recommendation along
with its findings to Government of Nepal within one month.
24. Resignation by Director: The Governor, Deputy Governor or Director
may resign from his/her office by tendering a written resignation to
Government of Nepal.
25. Public Notification of Governor's Appointment: Government of
Nepal shall, normally one month prior to the vacancy in office of the
Governor, make appointment to the office of Governor in accordance with
this Act and issue and transmit public notice of such appointment.
26. Fulfillment of Vacant Office: In cases the office of the Governor,
Deputy Governor and Director falls vacant before expiry of the tenure of
office, Government of Nepal shall, appoint appropriate person to such
office for the remaining term of office pursuant to the provisions made
under this Act.
27. Acting Governor: Government of Nepal shall depute the Senior Deputy
Governor of the Bank as Acting Governor to discharge the functions of the
Governor in cases where the Governor dies or resigns from office, falls
sick, goes on leave or is unable to discharge his/her duties due to any
reason.
28. Meeting of the Board: (1) The Governor shall preside over the meeting
of the Board.
(2) The meeting of the Board shall be held as per the requirement
of the Bank.
Provided that the Board meets at least once in a month.
(3) The Governor shall call on the meeting of the Board.
Provided that in case of a written request from three Directors of the
Board to call the meeting of the Board, the Governor shall call the meeting
of the Board.
(4) The Board may frame a separate Bye-law with regard to the
procedures for calling the meeting of the Board, conducting the meeting,
voting, keeping minutes and for other matters.
(5) The presence of at least three Directors and of the person
presiding over the meeting of the Board shall constitute the quorum for the
meeting of the Board.
Provided that out of the three Directors presented in the meeting at least
one director should be the director appointed under Clause (d) of Section
14.
(6) The decision of the majority shall be the decision of the Board.
In the event of a tie of votes for and against a resolution, the person
presiding over the meeting shall exercise a decisive vote.
29. Functions, Duties and Powers of the Board: The functions, duties and
powers of the Board shall be as follows:
(a) To frame monetary and foreign exchange policies;
(b) To take necessary decisions with regard to the
denominations of bank notes and coins, the figures,
size, metal, materials for printing notes, and other
materials; and to frame appropriate policies with
regard to their issue;
(c) To frame necessary policies for causing the
supervision and inspection of commercial banks and
financial institutions and banking and financial
arrangement.
(d) To approve Rules and Bye-laws of the Bank and to
frame policies applicable to the operation and
management of the Bank;
(e) To frame policies with regard to the appointment,
promotion, transfer, dismissal, remuneration, pension,
gratuity, provident fund, leave, code of conduct and
other terms and conditions relating to the service of the
employees of the Bank;
(f) To approve the annual programs and budget of the
Bank and the annual auditing of accounts, and to
submit its report to Government of Nepal for
information;
(g) To approve the annual report on the activities of the
Bank;
(h) To frame necessary policy for the issue of license to
commercial banks and financial institutions and for
revoking such license;
(i) To approve the limit of the loan to be provided to
Government of Nepal by the Bank;
(j) To fix the amount, limit and terms and conditions of
the loan and refinance which the Bank provides to the
commercial banks and financial institutions;
(k) To make decision with regard to the Bank's
membership to international organizations,
associations;
(l) To frame policy for the mobilization and investment of
Bank's financial resource;
(m) To submit proposal to Government of Nepal along
with the reasons there for if it is necessary to make
amendment to this Act;
(n) To take decision on all other matters excluding the
matters which are within the authority of Governor
under this Act; and
(o) To delegate the powers vested on the Board to the
Governor or the subcommittee constituted by the
Board with or without fixing the time limit.
30. Functions, Duties and Powers of the Governor: (1) The functions, duties
and powers of the Governor shall be as follows:-
(a) To implement the decisions made by the Board;
(b) To operate and manage the Bank;
(c) To systematize the functions to be carried out by the
Bank;
(d) To represent and cause to represent on behalf of the
Bank in international organizations and associations;
(e) To implement and cause to implement the policies
relating to monetary and foreign exchange matters;
(f) To formulate necessary policy on rates of interest for
deposits and loan with commercial banks and financial
institutions;
(g) To formulate necessary policies with regard to the
rates of interest to be paid by commercial banks and
financial institution on deposit and loan or the rate of
interest to be charged by them on deposits and loan;
(h) To formulate necessary policies relating to liquidity to
be maintained by commercial banks and financial
institutions;
(i) To make necessary arrangement with regard to the
basis, amount, methods, conditions and duration of
compulsory deposit to be maintained by commercial
banks and financial institutions, and its use;
(j) To fix the terms and conditions relating to adequacy of
the capital fund of commercial banks and financial
institutions;
(k) To take decision with regard to the procedures and
terms and conditions to be followed while purchasing
and selling gold and other precious metals;
(l) To fix the charge on the services to be provided by the
Bank;
(m) To take decision for opening and closing branch
offices and other offices of the Bank as may be
necessary;
(n) To establish and close the agency of the Bank;
(o) To make necessary arrangement for development and
operation of information system of the Bank;
(p) To make necessary arrangement for supervision of
commercial banks and financial institutions;
(q) To take decision with regard to revocation of the
license provided to commercial banks and financial
institutions;
(r) To take decisions on any other matters subject to the
powers delegated by the Board of Directors;
(2) The powers to be exercised by the Governor of a Central Bank in
accordance with international practice shall be vested in the Governor.
31. Delegation of Powers: The Governor may, in order to conduct the
business of the Bank in a smooth manner, delegate authority invested with
him/her under this Act to the Deputy Governor or other employees of the
Bank.
32. Prohibition on Vested Personal Interests: (1) After appointment to the
office of Governor, Deputy Governor or Director shall, in each six months,
should disclose, as prescribed to the Board about any direct or indirect
commercial interest of himself/himself or of his/her family members.
(2) Where any resolution involving personal interest of the
Governor, Deputy Governor or Director, shall disclose to the Board about
his personal interest on any matter to be discussed in the meeting of the
Board, prior to the beginning of discussion on such matters. No such
Director shall take part in that meeting.
(3) No Governor or Deputy Governor shall be allowed to work in a
commercial bank and financial institution till one year after retiring from
his/her office.
(4) The Governor and Deputy Governor should make it public the
details of property held in his/her name and in the name of his/her family
members within one month from the date of appointment and retirement.
33. Management Committee: (1) There shall be a Management Committee,
to remain under the Board to be chaired by the Governor in order to
conduct the business of the Bank in a smooth manner. The two Deputy
Governors shall be other members of the Management Committee, and one
senior officer of the Bank designated by the Governor shall act as the
member-secretary of the committee.
(2) The functions, duties and powers of the Management Committee
formed pursuant to Sub-section (1) shall be as prescribed.
(3) Notwithstanding anything contained in Sub-section (1), the
Governor may invite any of the officers to take part in the meeting of the
Management Committee.
(4) The Committee shall, in connection with discharging its
functions, evaluate the country's monetary and financial condition on a
periodic basis. For this purpose, the Management Committee shall, at least
once in a month, submit a report to the Board on the Bank's administration
and operation, operation of monetary and other regulatory policies, the
soundness of the banking system of the country, condition of money,
capital and foreign exchange market, implementation of such policies and
impact they may have and situation on the banking system, and on the
significant events.
34. Audit Committee: The Board shall constitute an Audit Committee
comprising of the following members which will be accountable to the
Board:-
(a) One Director -Convener
(b) Chief of Internal Audit Department
of the Bank -Member
(c) One senior officer of the Bank designated
by the Board -Member
35. Functions, Duties and Powers of the Audit Committee: (1) The
functions, duties and powers of the Audit Committee shall be as follows:-
(a) To submit its report and recommendations to the
Board on accounts, budget and audit procedures and
control system of the Bank;
(b) To ascertain whether or not the audit and preparation
of periodic balance sheet and other documents of the
Bank have been carried out properly;
(c) To supervise the implementation of the appropriate
risk management adopted by the Bank;
(d) To audit managerial and performance of works of the
Bank in order to be assured that the prevailing laws
applicable to the Bank have been fully complied with;
(e) To frame bye-law for auditing of the Bank in
accordance with the prevailing laws and international
auditing standard and to submit it to the Board for
approval.
(2) The Audit Committee shall, while submitting the report and
recommendations to the Board pursuant to Clause (a) of Sub-section (1),
furnish the information thereof to the Governor.
36. Employees of the Bank: (1) The Board shall appoint necessary employees
in order to conduct the business of the Bank in a smooth manner.
(2) The terms and conditions, remuneration and other benefits
payable to the employees appointed pursuant to Sub-section (1) shall be as
prescribed.
37. Professional Code of Conduct and Official Responsibility: (1) The
Governor and Deputy Governor shall, so long in office, fully devote his/her
professional service to the Bank. Except nominated by the Bank they shall
not be entitled to assume any type of office or accept job in or render
services to any one else with or without remuneration.
Provided that this Sub-section shall not restrict to render services by
assuming any post in any non-profit making organizations such as Medical
Association, Engineers Association, Bar Association, Bankers Association,
Chartered Accountants Association and in any other trade and professional
organization.
(2) The Governor, Deputy Governor or Director shall have to
provide highest priority to the interests of the Bank while discharging their
official duties.
(3) The Governor, Deputy Governor or Director shall not accept,
personally or through any person having any commercial, financial
relationship with him, any type of gift or loan in a manner that may cause
undue influence of any type in discharging his duties.
38. Confidentiality: (1) No Governor, Deputy Governor or Director or
employees, Advisor, Auditor, Agent or Representative of the Bank shall be
allowed to be engaged in the following acts and activities:-
(a) To divulge any published or unpublished confidential
information or notice that came to his knowledge while
exercising his official duty to any other person; or
(b) To use such information or notice for personal gain.
(2) Notwithstanding anything-contained in Sub-section (1), any
published or unpublished information in one's knowledge may be divulged
on the following grounds in the manner prescribed by the Bank:-
(a) Providing such information while discharging one's
duties in public, while assisting law enforcement
agencies, as per the order of the court or of the
authorized officer;
(b) Providing such information, in connection with
discharge of his/her duties, to the external Auditor of
the Bank and the employees of international financial
institutions; and
(c) Providing such information in connection with legal
actions for the sake of the Bank's interests.

Chapter - 4
Financial Provisions
39. Capital of the Bank: (1) The Capital of the Bank shall be one billion
rupees.
(2) The Capital of the Bank shall be received from Government of
Nepal and this Capital shall not be transferred or any burden of debt be
placed upon it.
(3) Government of Nepal may alter the capital referred to in Sub-
section (1). Government of Nepal shall have consultation with the Bank
while altering the capital.
40. Computation of Net Profit or Loss: (1) The Bank shall prepare the
account of its net profit and loss in each Fiscal Year.
(2) While preparing the account of profit and loss pursuant to Sub-
section (1), it shall be prepared in accordance with the international
accounting standard.
(3) While preparing profit and loss account, the profit made and the
loss sustained or the loss yet to be appropriated and the net valuation gains
or loss shall be reconciled and the bad or doubtful debts and depreciation of
property shall be deducted therefrom.
41. Allocation of Net Profit: (1) In case the Bank makes a profit in any
fiscal year, the allocation and use of such profit shall be made in according
to the following priority:-
(a) Unless five percent of the total monetary liability of
the Bank shown in the balance sheet is met, an amount
equal to five percent of the net profit of each year shall
be allocated from the profit and kept in the monetary
liability fund. The amount deposited in the monetary
liability fund shall be used only for the purpose of
fulfilling the financial liability of the Bank.
(b) An amount prescribed by the Board not less than ten
percent of the net profit of the Bank shall be allocated
in the general reserve fund established by the Bank.
(c) While allocating an amount in the general reserve fund
pursuant to Clause (b), an additional amount shall be
appropriated to cover the capital expenses referred to
in the annual budget of the Bank.
(d) The amount equal to the revaluation profit shall be
kept in the revaluation reserve fund.
(e) The Board shall, having appropriated the amounts
referred to in Clauses (a), (b), (c) and (d), appropriate
the remaining profit in other funds as may be
necessary and pay the remaining amount to
Government of Nepal.
(2) The amount allocated to general reserve fund pursuant to
Sub-section 1 Clause (b) and (c) shall be used only for the purpose of
recovering the loss.
42. Allocation of Net Loss: (1) In case the Bank sustain net loss in any fiscal
year, such loss shall be allocated as follows:-
(a) In cases where the total operation loss and
revaluation loss have been included in the net loss,
the amount of the total operation loss shall be
charged to the general reserve fund or to the capital
account. The amount of revaluation loss shall be
debited to the revaluation reserve fund. While
making such allocation, if the revaluation reserve
fund also is at loss, it shall be debited to general
reserve fund or the capital account.
(b) In case the net loss is due to accumulation of the
total operation loss and the revaluation loss, the
amount of such net loss shall be debited to the
revaluation fund. If the balance of the revaluation
reserve fund would be negative after such
allocation, it shall be debited to the general reserve
fund or the capital fund.
(2) The Government of Nepal shall bear the loss that cannot be
adjusted after making allocation pursuant to Sub-section (1).
43. Annual Budget: The Board shall, prior to the beginning of each fiscal
year, approve the estimated budget of incomes and expenditures and the
programs for the coming fiscal year. The Board may evaluate and amend
the approved budget in each three months on the basis of actual position
and the matters that can be estimated. Such budget shall be sent to
Government of Nepal for information.
Chapter - 5
Monetary Functions and Operation of Open Market
44. Monetary Policy: The Bank shall have full powers to formulate,
implement and cause to implement monetary policy of Nepal.
45. Operation of Open Market: The Bank shall operate open market
transaction on the basis of agreements for immediate or late purchase and
sale of debt securities issued on behalf of Government of Nepal or by the
Bank itself and may immediately be sold in market. Such transaction may
also be in the forms of repurchase agreements or reverse repurchase
agreements. For this purpose, no other instruments shall be used.
46. Compulsory Deposit in Commercial Banks and Financial
Institutions: (1) The Bank shall issue directives to the commercial banks
and financial institutions to maintain compulsory reserve with the Bank in
proportion to the deposits accumulated with them, borrowed fund or other
liability prescribed by the Bank. It shall be the duty of commercial banks
and financial institutions to maintain the compulsory deposit in the Bank as
prescribed by the Bank.
(2) While computing the compulsory deposit of commercial banks
and financial institutions, the Bank shall compute on the basis of daily
average of deposit by prescribing the duration.
47. Failure to Maintain Compulsory Deposit: In cases where any
commercial bank or financial institution fails to maintain the compulsory
deposit prescribed by the Bank, the Bank shall impose a fine on bank or
financial institution for the period of such failure. While imposing the fine,
the amount of fine shall not be more than three times of the maximum of
the bank rate prescribed by the Bank.
48. Discount Operation: (1) The Bank may conduct discount transaction on
the following negotiable instruments submitted by the commercial bank
and financial institutions who maintain their accounts with the Bank:-
(a) A promissory note or bill of exchange signed by at
least two parties including a commercial bank
payable in Nepal within six months.
(b) Debt bond issued by Government of Nepal or the
Bank payable within Nepal and within six months
from the date of acquisition by the Bank.
(2) The discount rates, terms and conditions and procedure of
operating discount transaction shall be as prescribed by the Bank.
49. Loan and Refinance to Commercial Banks and Financial
Institutions: (1) The Bank may, subject to the terms and conditions
prescribed by it, make available loan and refinance to commercial banks
and financial institutions for a maximum period of six months against the
security of the following assets:-
(a) International negotiable instrument referred to in
Clause (e) of Sub-section (1) of Section 66;
(b) The debt bond issued by Government of Nepal
payable within Nepal;
(c) The deposits accumulated in the Bank or the gold
and precious metals, which the Bank may transact
under this Act;
(d) The bill of exchange or the promissory notes
referred to in Sub-section (1) of Section 48;
(e) Other securities as prescribed.
(2) Notwithstanding anything contained in Sub-section (1) of the
Bank may provide any type of credit to a commercial bank and financial
institution for a maximum period of one year in cases where Government
of Nepal has, for the sake of public interest and welfare, deemed it
appropriate to provide loan and has requested the Bank therefor and
Government of Nepal has given a guarantee of securities of prevailing
market rate for such loan or in extraordinary circumstances where the Bank
has to work as a lender of the last resort.
50. Discount Rate and Rate of Interest for Refinance: The Bank shall fix
the discount rate and the rate of interest for refinance from time to time. The Bank
shall publish and transmit the notice of discount rate and interest rate of refinance
for the information of all concerned.
Chapter 6
Monetary Unit, Banknote and Coins
51. Monetary Unit: (1) The Rupee shall be the monetary unit of Nepal and
such Rupee shall be divided in one hundred Paisa.
(2) The Rupee referred to in Sub-section (1) shall be a legal tender
within Nepal and Government of Nepal shall provide guarantee for such
Rupee.
52. Power to Issue Banknotes and Coins: (1) The Bank shall have
monopoly over the issue of banknotes and coins in Nepal. Such notes and
coins shall be legal tenders in Nepal.
(2) The Bank shall issue notes pursuant to Sub-section (1), only
against the security, and the liability of such issued notes shall be equal to
the value of property kept as security. At least fifty percent of the property
to be kept as security shall be one or more of gold, silver, foreign currency,
foreign securities, and foreign bills of exchange and the remaining
percentage shall be one or more of the coins (Mohar Double or coins of
higher denomination, the Debt Bond issued by Government of Nepal, the
promissory note or bills of exchange payable in Nepal within a maximum
of eighteen months from the date of repayment by bank.
Provided that with the permission of the Government of Nepal the ratio of
property kept as security may be at least forty percent one or more of gold,
silver, foreign currency, foreign securities, and foreign bills of exchange
and the remaining percentage shall be one or more of the coins (Mohar
Double or coins of higher denomination, the Debt Bond issued by
Government of Nepal, the promissory note or bills of exchange payable in
Nepal within a maximum of eighteen months from the date of repayment
by bank.
(3) For the purpose of Sub-section (2), the valuation of property
shall be made as follows:-
(a) The price of gold at the rate fixed by Government of
Nepal on the recommendation of the Board;
(b) The price of silver at the rate deemed appropriate by
the Board;
(c) The foreign currencies at the exchange rate fixed by
the Bank;
(d) The Debt Bond issued by Government of Nepal, the
foreign securities and Bills of Exchange at the rate
deemed appropriate by the Board on the basis of
market rates;
(e) Coins at the rate of face value.
(4) The Bank shall issue the bank notes of various denominations as
may be necessary. While issuing banknotes in this way, the figures
appearing in the notes, size and denominations shall be as approved by
Government of Nepal and the figures, internal security arrangements, the
materials for printing banknotes and other materials shall be as decided by
the Board.
(5) Government of Nepal may, in consultation with the Board,
declare that banknote of any denomination shall cease to be legal tender in
any place other than the prescribed place or office having published a
notification in the Nepal Gazette.
(6) The Bank shall not reissue the notes, which are torn, defaced or
excessively soiled.
(7) The Bank may, with the approval of Government of Nepal, mint
and bring into circulation the coins of whatever metal or mixture of metals
or bring into circulation having minted them in Mint on specials occasions.
The Bank may, if it deems appropriate, cause such coins minted in any
foreign Mint.
Provided that, if coins minted once with the approval is to be re-
minted, no approval of Government of Nepal shall be required.
(8) The Bank may, with the approval of Government of Nepal, mint
the coins sent for minting by a foreign government.
(9) The Bank shall be responsible for payment of the banknotes
issued by the Bank and the banknotes issued by Government of Nepal prior
to the establishment of the Bank.
(10) No liability other than the liability referred to in Sub-section (9)
shall be borne from the property given as security for issuance of
banknotes.
53. Banknotes and Coins to be Acceptable all: The banknotes and coins
issued by the Bank having made them legal tender shall be all acceptable to
the extent of the amount of face value for repayment of all types of public
or private debts within Nepal.
54. Measurement, Weights and Size of Coins: The face value,
measurement, weight, size and other features of the coins to be issued by
the Bank under this Act shall be prescribed by the Board.
55. Issuance of Currency and Security: Matters relating to printing of
banknotes and minting coins, providing security to the not issued
banknotes and coins, keeping them in appropriate manner and the matter of
safe keeping or destroying the old banknotes or coins which are not in
circulation, plate and die shall be as prescribed.
56. Provisions for Exchange of Currency: The Bank shall, without any
fee or charge, change a banknote or coin with legal tender in Nepal with
the banknotes or coins of same denomination or of different denominations
of the equal value.
57. Soiled or Counterfeit Currency: (1) The Bank may withdraw, destroy
or replace the soiled currency with other banknote or coin.
(2) Notwithstanding anything contained in Sub-section (1), the Bank
may deny to replace the banknote or coin the design of which has been
deleted, or which is torn, defaced or more than fifty percent of its portion
has been destroyed.
(3) The Bank may withdraw or destroy such banknotes or
with or without compensation to the owner of the banknotes or
coins referred to in Sub-section (1).
(4) No owner of the lost or stolen banknotes or coins shall be entitled
to a reimbursement from the Bank. The Bank may forfeit without any
compensation, the coins or notes the outer appearance of which is changed,
or which is counterfeit coins or fake note.
Explanation: For the purpose of this Section, "Counterfeit coin"
means a duplicate coin minted copying the coin issued by the Bank or a
counterfeit coin or prepared by melting or manipulating or a coin prepared
by cutting and breaking into two or more places a coin issued by the Bank
or the coin the figures, letters and signs in which have been defaced.
58. Provisions Relating to Currency Inventory and Issuance of
Currency: The Bank shall carry out the functions relating currency stock
and issue of currency and to regularly supply the banknotes or coins in
order to meet the demand of currency.
59. Account of Issued Currency: The Bank shall maintain account of the
entire banknotes and coins in circulation showing them separately as
monetary liability. Such liability shall not include the bank notes and coins
in stock or not in circulation.
60. Currency Recall: (1) The Bank may recall the bank notes and coins in
circulation within Nepal by issuing in exchange there for other bank notes
and coins in equivalent amount. The Bank shall publish and transmit pubic
notice clearly specifying the period during which the bank notes or coins
must be presented for exchange and where they are to be so presented.
(2) Notwithstanding anything contained in Section 53, upon expiry
of the time prescribed pursuant to Sub-section (1), bank notes and coins to
be exchanged shall cease to be a legal tender.
(3) The Bank may cut, break or demolish or destroy in any manner
whatsoever, the banknotes and coins withdrawn from circulation and the
currency with defect, as prescribed.

61. Reproduction and Counterfeiting of Currency: (1) No one shall
commit or cause to commit any of the following acts:-
(a) To forge, counterfeit or alter banknotes and coin in
circulation as legal tender in Nepal or any cheques or
payment card or to do any other act relating to it or to
assist in any of such acts;
(b) To possess, transport or issue any banknote or coin or
cheque or payment card with the knowledge that such
banknote or coin, cheque or payment card was falsely
made, forged, counterfeited or altered or to assist in
such acts in any manner;
(c) To possess, transport any sheet of metal, stone, paper,
die or any other material or substance with the
knowledge that it was destined to be used in falsely
making, forging, counterfeiting or altering any
banknote or coin, cheque or payment card or to assist
in any of such acts.
(2) Any reproduction of banknotes, coins, checks, securities or
payment cards, denominated in Rupee, and the creation of any objects that
by their design imitate any such banknote, coin, check, security or payment
card, shall require the prior written authorization of the Bank.
(3) The Bank may take appropriate action to prevent the issue of
fake note or counterfeit currency or duplicate cheque or payment. The Bank
may issue necessary order, directives or notices while taking such actions.
Chapter - 7
Foreign Exchange Policy, Regulation and Reserve
62. Foreign Exchange Policy: The Bank shall have full authority to
formulate, implement and cause to implement foreign exchange policy of
Nepal.
63. Management of Foreign Exchange: The Bank shall manage the
foreign exchange. The Bank shall have the following powers for
such management: -
(a) To issue license under this Act or any other
prevailing laws to the persons willing to deal in
foreign exchange transaction;
(b) To frame Rules and Bye-laws and to issue necessary
order, directives or circulars in order to regulate
dealings in the foreign exchange transaction by the
foreign exchange dealer;
(c) To inspect, supervise and monitor the foreign
exchange dealer;
(d) To set the bases, limitations and terms and
conditions for the transaction of the foreign
exchange dealer; and
(e) To prescribe the system of determining the foreign
exchange rates of the Nepalese currency.
64. Particulars of Foreign Exchanges Dealings: (1) The Bank shall cause
the license-holder to submit to the Bank the detailed particular of exchange
of foreign currency and of the transaction relating to it. The duration for
submitting such particulars, the format and other documents relating to it
shall be as prescribed by Bank from time to time.
(2) It shall be the duty of the concerned license holder to submit the
particulars referred to in Sub-section (1) and the documents prescribed by
the Bank.
65. Dealing in Foreign Exchanges: (1) The Bank may purchase and sell
foreign exchanges, gold and precious metals.
(2) The purchase and sale to be made by the Bank pursuant to Sub-
section (1) shall be effected through the spot, advance exchange rate, swap,
option or the similar types of other instruments, cash or negotiable
instrument.
(3) The Bank may, for the purpose of Sub-section (1) of Section 66,
purchase or sell foreign exchange. It may affect such purchase and sale also
on the basis of spot, advance exchange rate, swap, option or similar types
of other of instruments.
(4) The Bank shall deal in foreign exchange after fixing its buying
and selling rates. The basis, limitations and conditions of such dealing shall
be as prescribed by the Bank.
66. Foreign Exchange Reserve: (1) The Bank shall mobilize the foreign
exchanges reserve. Such reserve shall be denominated in the respective
foreign exchange and such reserve shall consist of the following assets:-
(a) Gold and other precious metals held by or for the
account of the Bank;
(b) Foreign currencies held by or for the account of
the Bank;
(c) Foreign currencies held in the accounts of the
Bank on the books of a foreign central bank or
other foreign banks;
(d) Special drawing rights (SDR) held by the Bank at
the International Monetary Fund;
(e) Bill of exchange, promissory note, certificate of
deposit, bonds, and other debt instrument payable
in convertible foreign currencies issued by any
debtor or liability holder and held by the Bank;
(f) Any forward purchase or repurchase agreements of
the Bank concluded with or guaranteed by foreign
central banks or public international financial
institutions, and any futures and option contracts
of the Bank providing for payment in freely
convertible foreign currency.
(2) While selecting the assets referred to in Sub-section (1), due
consideration should be given to the Bank's capital and liquidity to
maximize earnings.
(3) The Bank shall maintain international reserve at a level, which
shall be adequate for the execution of monitory and exchange rate policies
and for the prompt settlement of the international transaction.
(4) If international reserves have declined or, in the opinion of Bank,
are in danger of declining to such an extent as to jeopardize the execution
of the monetary or exchange rate policies in the prompt settlement of the
country's international transactions, the Bank shall submit to Government
of Nepal a report on the international reserves position and the causes
which have led or may lead to such a decline, together with such
recommendations as it considers necessary to remedy the situation.
(5) Until such time as, the situation referred in Sub-section (4) has
been rectified, the Bank shall make further such report and
recommendations to Government of Nepal.
(6) The Bank shall hold the foreign exchange reserve referred to in
Sub-section (1) in its balance sheet.
67. Issuance of Debt Bond Against Gold and Foreign Currency: (1)
The Bank may, having obtained approval from Government of Nepal, issue
one or more types of debt bond denominated in gold or foreign currency
for certain purpose.
(2) The types, duration, payment of principal and interest and other
matters of the debt bond to be issued pursuant to Sub-section (1) shall be as
prescribed by the Bank.
68. International Clearing and Payment Agreements: The Bank may,
either for its own account or for government account and by the order of
Government of Nepal, enter into clearing and payment agreements with
public or private central clearing unions domiciled abroad. The Bank may,
in order to implement the objectives of such agreement, enter into other
necessary agreements.
Chapter - 8
Relation with Government of Nepal
69. Banker, Advisor and Financial Agent: (1) The Bank shall be the
banker and financial advisor of Government of Nepal and a financial agent
of Nepal.
(2) Government of Nepal shall consult the Bank on any matters that
are within the jurisdiction of its competence. It shall be the duty of the
Bank to advise on matter consulted by the Government of Nepal.
(3) Government of Nepal shall, while preparing annual budget,
consult the Bank on the domestic debt including overdrafts.
(4) The Bank shall submit a pre-budget review report to Government
of Nepal each year on the economic and financial matters.
70. Opinions and Information Relating to External Debt: (1)
Government of Nepal may consult the Bank while taking loan from
external sectors.
(2) The consultation referred to in Sub-section (1) shall include the
subjects such as amount of loan, the terms and conditions of the loan and
the repayment of loan.
(3) Government of Nepal shall inform the Bank when external loans
have been received.
(4) Government of Nepal shall consult the Bank while granting
approval to private and public institutions to raise loan-creating liability in
foreign exchange.
(5) Government of Nepal, public institution or private sector shall
inform the Bank about the agreements concluded having creating liability
in foreign exchange.
71. Deposit Collection: (1) The Bank shall accept the deposits of Government of
Nepal or other bodies prescribed by Government of Nepal.
(2) While accepting deposits pursuant to Sub-section (1), the Bank
shall receive and disburse monies, keep accounts therein, and provide
banking services related thereto.
(3) The Bank may authorize commercial banks and other financial
institutions to conduct the transaction as referred to in Sub-section (2)
subject to the terms and conditions prescribed by the Bank.
72. Functions of Fiscal Agent: The Bank shall, subject to the terms and
conditions stipulated in the agreement entered into with Government of
Nepal, act as fiscal agent of Government of Nepal on the following
matters:-
(a) Marketing, purchase and sell of debt bonds issued by
Government of Nepal and to act as registrar and
transfer agent therefor;
(b) Payment of the principal, interest and other fees of
the debt bonds referred to in Sub-section (a);
(c) Other necessary functions to be carried out as the
agent.
73. Bank may ask for Particulars, Statistics and Documents: (1) The
Bank may ask for the particulars, statistics and documents necessary for
conduct of its business from the concerned bodies.
(2) It shall be the duty of the concerned bodies to provide the Bank
with the particulars, statistics and documents asked for under Sub-section
(1).
74. Consultation on the Matter of Law Reform: (1) The Bank may be
consulted on any proposals by the concerned entities for legislation with
respect to matters that relate to Bank objectives or that otherwise are within
its fields of competence, including monetary policy and its operations,
credit, the balance of payments, foreign exchange, and banking, before
they are submitted for amendment or legislative action.
(2) It shall be the duty of the Bank to provide opinion sought
pursuant to subSection (1).
(3) The Bank shall have powers to submit proposals to Government
of Nepal for enacting new law or amending the existing laws on the
subjects relating to the objectives of the Bank or area of its competence
such as monetary policies and its operation, credit, balance of payment,
foreign exchange and banking.
75. Credit to Government of Nepal and Purchase of Government
Debt Bonds: (1) Except otherwise provided in this Act, the Bank shall not
provide any type of financial assistance to Government of Nepal or an
institution under the full or substantial or partial ownership of Government
of Nepal.
(2) Subject to the limits specified in this Section, the Bank may
extend credit to Government of Nepal with a condition to repay within one
hundred eighty days.
(3) Notwithstanding anything contained in Sub-section (2), the Bank
may extend a special credit of long term to Government of Nepal only on
account of subscription and similar payments resulting from or incidental
to the membership of Nepal with international organization.
(4) The Bank shall disburse credit to be extended to Government of
Nepal or an institution under full or substantial or partial ownership of
Government of Nepal only in Nepalese rupees. Such credit shall be
certified by negotiable debt bond issued by Government of Nepal and
delivered to the Bank. Such debt security should have the maturity
corresponding to the maturity of the extension of credit and should bear the
interest at market rate. There must be a written agreement executed
between Government of Nepal and the Bank. Such agreement should
clearly stipulate the principal amount of the loan or limit on a line of credit,
the maturity, and the applicable rates of interest and other charges.
Explanation: For the purpose of this Section, " Negotiable Debt
Bond" means the debt bond issued in the form of promissory note.
(5) At no time the amount of overdraft provided by the Bank to
Government of Nepal shall be more than five percent of the revenue
income of Government of Nepal in the proceeding fiscal year. While
computing such revenue income, the amount of borrowing, grants or any
other form of financial assistance or income received from the sale of
property shall not be included.
(6) Government of Nepal shall make the payment of the overdraft
referred to in Sub-section (5) within one hundred eighty days at the
prevailing interest rate either in the form of cash or marketable debt bond.
(7) The total amount of debt bond purchased by the Bank from
Government of Nepal and taken into its ownership shall not be more than
ten percent of the revenue income of the proceeding fiscal year.
(8) In the following circumstances, the debt bond issued by
Government of Nepal and purchased by the Bank shall not be treated as the
credit extended under Sub-section (7):-
(a) If the purchase is made in the secondary market for
the operation of open market consistent with the
monetary policy of the Bank;
(b) If the purchase is made in the primary market, when
it is necessary in the opinion of the Bank, to
maintain stability in the market at the time of
primary issue of such securities and such securities
are divested within 60 days of purchase.
(c) The debt bond purchased by the Bank from
Government of Nepal and retained in its ownership
prior to the commencement of Sub-section (7).
Chapter - 9
Regulation, Inspection and Supervision of the Banks
76. Bank's Approval Required for Accepting Deposits or Giving
Credits: (1) Any person, firm, company or institution shall, in order to
accept any type of deposit or to provide loan, obtain approval from the
Bank as may be prescribed.
(2) The Bank, while giving approval referred to in Sub-section (1),
may subject the approval to the terms and conditions prescribed by the
Bank and it shall be the duty of the concerned person, firm, company or
institution to abide by such terms and conditions.
77. Restriction on Rate of Interest: An individual, firm, company or
organization authorized to accept deposit or to provide loan pursuant to
prevailing laws, shall fix the rate of interest payable on deposit and to be
charged on loan subject to arrangement prescribed by the Bank in the
matter of rate of interest from time to time.
78. License to be Obtained from Bank: (1) Commercial Banks and
financial institutions shall, in order to conduct banking and financial
transaction, obtain license from the Bank as prescribed.
(2) While issuing license pursuant to Sub-section (1), the Bank may
fix necessary terms and conditions and it shall be the duty of the licensed
bank and financial institution to abide by such terms and conditions.
79. Regulatory Powers of Bank: (1) The Bank shall have full powers to
regulate the functions and activities of commercial banks and financial
institutions.
(2) For the purpose of the regulation under Sub-section (1), the Bank
may frame rules and bye-laws on the matters which the Bank deems
appropriate and issue necessary order, directives and circular and it shall be
the duty of the concerned commercial bank and financial institution to
abide by such Rules, Bye-laws, order, directives and circular.
(3) The Bank shall issue appropriate directives to commercial banks
and require them to submit the following particulars:-
(a) Its balance sheet accounts, off balance sheet
commitments, statement of income and expenditures
and their ratio among accounts or items.
(b) Prohibitions, restrictions or conditions concerning
specific types or forms of credit or investments, or of
credit or investments, forms of commitments of a
risk-bearing nature which are not matching as to
maturity of assets and liabilities and off-balance-sheet
items, foreign currency, spot or advance rate of
interest, swap, option or similar instruments or access
to the payments system through electronic or other
means.
(c) Other particulars and documents prescribed by the
Bank.
(4) Bank may issue necessary directives to commercial banks on the
following matters and require to submit particulars on the following
subjects:-
(a) Books and accounts, profit and loss account,
balance sheet and off-balance-sheet transaction
and commitment, statement of income and
expenses and their ratio among accounts or items.
(b) Prohibitions, restrictions or conditions
concerning specific types or forms of credit or
investments, loan and investment in excess of the
ceiling prescribed by the Bank, risk bearing
commitment, position of foreign exchange,
payment and electronic and other means of
payment.
(c) Other particulars and documents prescribed by
the Bank.
(5) The Bank shall have the following powers with regard to
commercial banks and financial institutions:-
(a) To enforce authority and responsibility granted
under this Act and any other Act enacted for
licensing, supervising and regulating commercial
banks and financial institutions and to revoke the
license of commercial banks and financial
institutions and to take over or to provide in
trusteeship the commercial banks or financial
institutions which have been declared insolvent or
are on the verge of insolvency;
(b) To investigate or inspect, or supervise or to cause to
investigate, inspect or supervise by any official of
the Bank or the person designated by the Bank the
books and accounts, records, documents or register
of commercial banks or financial institutions in
order to find whether or not any commercial bank or
financial institution has conducted business and
transaction in accordance with the provision made
under this Act or the Rules, Bye-laws framed
thereunder and an order or directive issued
thereunder;
(c) To issue order to the member of the Board of
Directors, official or employee of any commercial
bank or financial institution to provide necessary
information about the bank or institution in cases
where it is necessary to inspect and supervise the
transaction of such bank or financial institution.
80. Banking and Financial System and Credit Control: The Bank may
issue directives from time to time to commercial banks and financial
institutions on banking financial system, currency and credit. It shall be the
duty of commercial banks and financial institutions to abide by such
directives.
81. Credit to Prescribed Sectors: (1) Commercial banks and financial
institutions shall advance credit to the sectors prescribed by the Bank from
time to time for a prescribed period and in the manner prescribed by the
Bank.
(2) In cases where any commercial bank or financial institution does
not advance the credit pursuant to Sub-section (1) or advance credit less
than prescribed amount, the Bank may recover as fine an amount equal to
the interest which a commercial bank or financial institution would have
charged for the amount of credit not advanced or advanced less than the
prescribed amount from the concerned commercial bank or financial
institution.
82. Information to be Furnished to Bank: (1) Commercial Bank and
financial institution shall furnish the particulars of its transaction and
financial position to the Bank as prescribed by the Bank.
(2) The Bank may publish the particulars made available pursuant to
Sub-section (1).
83. Approval Required to Issue Debentures and Financial
Instruments: (1) Commercial banks and financial institutions shall, while
issuing any type of debenture or financial instruments, obtain a prior
approval of the Bank.
(2) While giving approval referred to in Sub-section (1), the Bank
may prescribe necessary terms and conditions and it shall be the duty of the
concerned commercial bank and financial institution to abide by such terms
and conditions.
84. Inspection and Supervision: (1) The Board shall frame and implement
inspection and supervision bye-law confirming to international standard for
inspection and supervision of the commercial banks and financial
institutions licensed by the Bank.
(2) The Bank may, at any time, inspect and supervise or cause to
inspect and supervise any of the offices of commercial banks or financial
institutions. Such inspection and supervision may be carried out by the
deputed official of the Bank or an expert designated by the Bank at the
office of the commercial bank or financial institution or by asking the
concerned institution to submit detailed particulars and information to the
Bank itself.
(3) It shall be the duty of the concerned commercial bank and
financial institution or Directors, officials or employees of such commercial
bank and financial institution to make available the statement, data, record,
information, particulars necessary for computer and auditing and other
programs and particulars developed through the electric system and
financial control system or necessary other documents to such official,
expert or the Bank or to enable such official or expert to review or to
examine them within the time prescribed by such officer or expert.
(4) The inspecting and supervising official or the Bank under this
Section may cause to record written statements of any Director, official or
employee of the commercial banks or financial institutions with regard to
the functions and proceedings which are deemed necessary in course of
inspection and supervision.
(5) The Bank or the inspecting and supervising official may issue
necessary directives to the commercial bank or financial institution on the
matters deemed necessary while inspecting and supervising. It shall be the
duty of the concerned commercial bank or financial institution to abide by
the directives issued by the Bank or by the inspecting or supervising
official. The inspecting or supervising official shall inform the Bank as
soon as possible about the directives so given.
(6) The official or expert carrying out the inspection and supervision
under this Section shall submit the report of the inspection and supervision
he has undertaken generally within fifteen days upon completion of his
works to the Bank. In case such report is not completed within fifteen days,
the Governor may extend the time limit for another fifteen days.
(7) The report submitted pursuant to Sub-section (6) should be
submitted in the next meeting of the Board.
(8) The Board may, after making appropriate decision on matters
contained in the report submitted pursuant to Sub-section (7), issue
appropriate directions to the Governor about the actions to be taken in the
matter. It shall be the responsibility of the Governor to implement or cause
to implement such directions.
85. Exchange of Mutual Cooperation: (1) The Bank may, in order to
supervise commercial banks and financial institutions under its supervisory
jurisdiction, exchange cooperation with concerned foreign supervisory
authority on reciprocal basis.
(2) The Bank may exchange the notices or information received for
carrying out supervision pursuant to Sub-section (1) with the foreign
supervisory authority provided that such authority undertakes to respect the
confidentiality of the information so received.
(3) The Bank may exchange mutual cooperation with other
institutions regulating the policies relating to financial system to promote
financial system.
86.
…………….
86A.
Information Need to Provide to the Bank by Commercial Banks
and Financial Institutions: Commercial bank or financial institution
shall inform to the bank within fifteen days about the situation of
insolvency or state of dissolution under the prevailing law or incapability to
pay the debt or materially unable to discharge any or all liabilities by any
commercial bank or financial institution.
86B. State of Problematic Commercial Bank and Financial Institution:
Bank shall declare any commercial bank or financial institution
problematic by providing written notice to it when bank is convinced that
the following conditions are prevailing in any commercial bank or financial
institution on the basis of information received under Section 86A or from
the report of inspection and supervision conducted under Section 84 or
from any other means.
(a) In case of any action which is against the interest of
the depositors, shareholders, creditors, or general
public,
(b) In case of not fulfillment of any financial liabilities
or not having probability to do that or not payment
of due amount,
(c) In case of insolvency or going to fall under
insolvency or facing material financial difficulties,
(d) In case of discredit or breach of this Act, prevailing
law related to bank and financial institution, other
prevailing law, terms of license or regulation,
directives or order of bank,
(e) In case the license obtained on the basis of
submitting false, fraudulent, wrong document or
data,
(f) In case of unable to maintain the capital fund as per
this Act, prevailing law related to bank and financial
institution and directives issued by the bank at time
to time,
(g) In case of the initiation of the process of liquidation
or insolvency of any commercial bank or financial
institution under the prevailing law,
(h) In case of undue delay in the process of voluntary
liquidation,
(i) For the commercial bank or financial institution
established with the joint venture of the foreign
commercial bank or financial institution while such
foreign commercial bank or financial institution is
in insolvent or liquidator is appointed for the
liquidation or the license of such commercial bank
or financial institution is terminated under the
provision of the law of respective country or
transaction is banned either full or partial or in case
of operation of banking transaction being involved
with such commercial bank or financial institution,
or
(j) If the bank is convinced that commercial bank or
financial institution is unable to pay it’s due or can
make negative effect in its liability or duties, which
it has to perform.
86C. Bank can Take Action Against Problematic Commercial Bank or
Financial Institution: (1) Whatever may be mentioned in the Companies Act
or other prevailing law, the bank can take any or all of the following actions
against the commercial bank or financial institution which is declared problematic
under the provision of Section 86B.
(a) To increase the paid capital by issuing new shares
or by receiving due amount of issued capital.
(b) To suspend the right to vote or other rights of
shareholder.
(c) To stop payment of dividend or any other amount to
the shareholders to increase the capital.
(d) To determine limitation to the amount of bonus,
salary, compensation and other expenses for the
director and other high level management officials.
(e) To make necessary arrangement for the corporate
governance, internal control and risk management
of commercial bank or financial institution.
(f) To prohibit or make limitation in collection of
deposit, credit supply or investment .
(g) To maintain sufficient capital and high proportion
of liquidity or prohibit business transaction or
determination of other necessary terms.
(h) To limit transaction of the commercial bank or
financial institution or prohibit sale of property or
expansion of branch office or close any domestic or
international branch.
(i) To maintain necessary arrangement for reduction of
risk of the properties which are materially doubtful
or securities without proper evaluation or other
properties
(J) To prohibit any action carried out illegally by
breaching the prevailing law and regulation of the
bank that is against the interest of commercial bank
or financial institution.
(K) To prohibit from doing some specific business
among the businesses allowed to commercial bank
or financial institution for specific time
(l) To receive prior approval of the bank for major
capital expenditure, substantial commitments having
major liabilities or for the expenditure of contingent
liabilities.
(m) To issue order to remove from the post to single or
more director or manager or employee as per the
necessity.
(n) Bank can remove the director or manager or
employee in case of not discharge of the order
made under Clause (m) by respective commercial
bank or financial institution.
(o) To suspend board of director of the commercial bank
or financial institution and takeover the
management of such commercial bank or financial
institution in self control or operate the management
and transaction of such commercial bank or
financial institution by appointed official.
Clarification: “Appointed Officer” means any
person, firm, company or organization appointed
by the bank for the management and operation of
transaction of the commercial bank or financial
institution which is in the control of bank under the
provision of this Clause.
(p) To order commercial bank or financial institution,
which is listed in Stock Exchange for the
application of de-listing.
(q) To prohibit payment of interest and principal for
time bond auxiliary loan without having securities
of commercial bank or financial institution.
(r) To take any other action as bank feels necessity and proper.
(2) While removing the directors, managers or employee of the
commercial bank or financial institution from their post as per the order of Clause
(n) or to suspend the board of director of commercial bank or financial institution
by taking the charge of management under Clause (o) of Sub-section (1)
reasonable opportunity of hearing shall be provided to the director, manager or
employee or board of directors of the commercial bank or financial institution
before.
Provided that if such opportunity of hearing can makes negative
effect to the interest of the commercial bank or financial institution or its
depositors, shareholders, creditors or general public, no provision of
prevailing law can debarred to remove immediately to the director,
manager or employee from their post or to suspend the board of directors
by providing opportunity to hearing after such decision.
(3) During the hearing of the action under the proviso of the Sub-
section (2) if such action does not seems reasonable bank can annul, change
or make necessary decision to the order under Clause (n) or (o) of Sub-
section (2).
(4) Respective commercial bank or financial institution have to bear
all the expenditure while bank take the control of management of any
commercial bank or financial institution under the provision of Clause (o)
of Sub-section (1) and makes arrangement for the management and
operation of transaction.
(5) The order of the bank issued under Sub-section (1) Clause (o)
shall generally remain valid for two years from the date of issue unless it is
not renewed by the bank.
(6) In case of control of any commercial bank or financial institution
by the bank under the provision of Clause (o) of Sub-section (1), the
preliminary and annual report prepared by the bank or the officer appointed
by the bank shall be submitted to the government of Nepal.
(7) In case of necessity bank can revoke or nullify its order issued
under the provision of Clause (m), (n), (o) and (p) of Sub-section (1) by
issuing another order. Such order shall contain the basis and reason and
other necessary information regarding the need of issuing such order.
(8) The directors, managers, or employees removed by the bank
under the provision of the Clause (n) of Sub-section (1) are not allowed to
work or involve in transaction in the same commercial bank or financial
institution as director, manager or employee or any other post of any
commercial bank or financial institution or any other way being involved
directly or indirectly.
(9) The directors, managers, or employees removed by the bank
under the provision of the Clause (n) of Sub-section (1) or suspended
member of board of directors under the provision of Clause (o) are not
allowed to receive or claim any remuneration or compensation under the
provision of prevailing law or agreement held directly or indirectly from
the date of such order.
(10) Determination of the capital and valuation of assets and
liabilities of any problematic commercial bank or financial institution shall
be based on the basis, process and standard determined by the bank.
86 D. Effect of the Control of the Bank to any Commercial Bank or
Financial Institution: (1) While bank takes control of any commercial
bank or financial institution by issuing order under the provision of the
Clause (o) of Sub-section (1) of Section 86C, for the management and
operation of transaction respective commercial bank or financial
institution; the directors, manager and employees of such commercial bank
or financial institution have to provide the assets, material goods and all
transaction and its report and other necessary cooperation and facilities to
the bank or the official appointed by the bank.
(2) While bank takes control of any commercial bank or financial
institution by issuing order under the provision of the Clause (o) of Sub-
section (1) of Section 86C, the official appointed by the bank for the
management and operation of transaction of such commercial bank or
financial institution, being within the limitation of order issued by the bank
have to manage and operate such commercial bank or financial institution
in the name of such commercial bank or financial institution by taking
control of the property and transaction unless the bank decide otherwise for
such order.
(3) Whatever may be written in the prevailing law, the appointed
official for management and operation of any commercial bank or financial
institution which is in the control of the bank, can exercise all the rights
conferred to such commercial bank or financial institution, its board of
directors, shareholders or manager by prevailing law, memorandum and
article association of such commercial bank or financial institution and
such official can exercise the act assigned for the general meeting or special
general meeting or any rights by any other way of such commercial bank or
financial institution.
(4) Till the date of validity of the order issued by the bank to take the
control of any commercial bank or financial institution, no director,
manager or employee removed under the provision of Clause (n) of the
Sub-section (1) of Section 86C and suspended director under the Clause (o)
of such commercial bank or financial institution, can be involve in the
management or take any remuneration or facility from such commercial
bank or financial institution during the period of being problematic without
written permission of the bank or the official appointed for the management
and operation of such commercial bank or financial institution.
86E. The Reformative Measures and Rights Which can be Used by the
Bank or the Official Appointed by the Bank: (1) Whatever may be
mentioned in the Companies Act or other prevailing law, the bank itself or
with the prior approval of the bank the official appointed by the bank can
initiate one or more than one of the following actions for the purpose of
restructuring of any problematic commercial bank or financial institution
which is under the control of the bank by order issued under the provision
of Clause (o) of Sub-section (1) of the Section 86C:
(a) To cancel or suspend any transaction operating
within or outside Nepal.
(b) To sell the assets of such commercial bank or
financial institution to any other commercial
bank or financial institution in terms and
conditions determined by the bank.
(c) To terminate the employment of the employees
working in such commercial bank or financial
institution and to appoint new employees in
their place as per necessity.
(d) To merge such commercial bank or financial
institution with other commercial bank or
financial institution or arrange to transfer the
assets and liabilities of such commercial bank or
financial institution partially or whole to any
other commercial bank or financial institution
or any other body.
(e) To increase the capital, being based on the
standard determined by the bank, by selling the
share to other person to reduce the participation
of the present shareholders or to restructure
such commercial bank or financial institution by
reshuffling the board of directors.
(f) To reduce the capital reflecting the actual price
of real assets of such commercial bank or
financial institution under the provision of
Section 86H and determine the face value of the
shares in the proportion of reduced capital.
(g) To do necessary managerial restructure or
corporate restructure by closing the branches
and transactions which are not properly running
for the protection of the interest of the
depositors, shareholders, creditors and general
public.
(h) To implement or cause to implement other
measures determined by the bank to make
competitive for the problematic commercial
bank or financial institution.
(2) The reasonable opportunity of hearing should be provided to any
commercial bank or financial institution before taking any decision under
Clause (f) or (g) of sub Section (1).
Provided that, if the bank feels that prior opportunity of hearing can
make negative effect to the interest of its depositors, shareholders, creditors
or general public, the bank can provide the opportunity of hearing as soon
as possible after making such decision and if the bank satisfied with the
reason and basis presented during the time of hearing it can change or
repeal the decision as per necessity.
86F. Right of the Bank for Corrective Action: (1) Bank has to publish in
public the report of management auditing or auditing within one year of the
control of the commercial bank or financial institution which declared
problematic under the provision of Clause (o) of Sub-Section (1) of Section
86C either conducted itself or by others.
(2) Whatever may be mentioned in the Companies Act or any other
prevailing law, on the basis of the management auditing or auditing report
under Sub-section (1) if bank convinced that the controlled commercial
bank or financial institution can operate properly it can carry out following
corrective actions as per necessity:-
(a) Issue order to manage and operate the transaction
to the board of director by releasing the
suspension order issued under the provision of
Clause (o) Sub-Section (1) of Section 86C,
(b) Assign the management and operation of
transaction to the new board of director formed
among the shareholders of such commercial bank
or financial institution by removing suspended
board of director under the provision of Clause
(o) of Sub-section (1) of Section 86C,
(c) Call or cause to call the general meeting of the
shareholders of such commercial bank or
financial institution to elect the new board of
director for the management and operation of
transaction after removing suspended board of
director under the provision of Clause (o) of Sub-
section (1) of Section 86C, or
(d) Carry out any other corrective measures, which
the bank thinks appropriate.
(3) Bank by public notice may issue the order to implement or cause
to implement the following actions on the basis of the management audit or
account audit report under Sub-section (1) or report of the official
appointed by the bank.
(a) To sale, distribute and transfer of shares of any
shareholders to the proper person to whom bank
think, in the price determined by the committee
constituted having representation from the
Securities Board Nepal, Chartered Accountant
Association Nepal and other outside expert being
based on the criteria determined by the bank.
(b) Transfer or cause to transfer partially or fully the
assets and liabilities of the problematic commercial
bank or financial institution to any commercial
bank, financial institution or any other body being
based in the terms and criteria determined by the
bank.
(c) To merge partially or fully the assets and liabilities
of the problematic commercial bank or financial
institution with any commercial bank, financial
institution or any other body which bank may think
proper, being based in the limitation of the Section
86J.
(d) To establish or cause to establish new commercial
bank or financial institution in the investment of the
Government of Nepal which also get the assets and
liabilities of problematic commercial bank or
financial institution under the provision of Section
86J and 86K.
(4) Bank can confiscate the shares which are not sold, distributed
and transferred because of any reason under Clause (a) of Sub-section (3),
and bank can sell, distribute and transfer such share any manner which it
think proper to any body with the advise of the committee constituted
under Clause (a) of Sub-section (3).
(5) Bank may provide reasonable opportunity of hearing to the
stakeholder about the proposed issue before taking any decision against any
commercial bank or financial institution under Sub-section (3).
Provided that, if the bank feels that prior opportunity of hearing can
make negative effect to the interest of such commercial bank or financial
institution, its depositors, shareholders, creditors or general public, the
bank can provide opportunity of hearing as soon as possible after making
such decision and if the bank satisfied with the reason and basis presented
during the time of hearing it can change or repeal the decision as per
necessity.
86G. Application for the Dissolution: In case the bank is convinced that any
problematic commercial bank or financial institution even after the action
under Section 86C, reformative action under Section 86E or corrective
action under Section 86F, such commercial bank or financial institution is
unable to discharge its liabilities or there is no possibility to operate in
healthy way, can apply to the Appellate Court for the dissolution of such
commercial bank or financial institution.
86H. Decrease of the Capital of Problematic Commercial Bank or
Financial Institution: (1) Whatever may be mentioned in the Companies
Act or other prevailing law or memorandum and article of association of
the problematic commercial bank or financial institution, after taking such
commercial bank or financial institution in its control under the provision
of the Clause (o) of the Sub-section (1) of the Section 86C, in case there is
reduction of the paid up capital of such commercial bank or financial
institution or the due amount was not paid by the shareholders or liabilities
is not recoverable by the assets of such commercial bank or financial
institution, bank can decrease the share capital of such commercial bank or
financial institution in limit of reduction of the share capital or liabilities
which is not coverable by the assets.
Provided that, before decrease of share capital the bank has to
publish minimum two notice of this effect in national daily.
(2) Whatever may be mentioned in the Companies Act or other
prevailing law or memorandum and article of association of the
problematic commercial bank or financial institution, bank can cancel the
remaining shares of the commercial bank or financial institution whose
assets and liabilities are partially or wholly transferred to other commercial
bank, financial institution or any other body under the provision of Clause
(b), (c) or (d) of Sub-section (3) of Section 86F by publishing minimum
two notice of this effect in national daily.
(3) Before issuing the notice under Sub-section (1) the bank has to
provide thirty days time for those shareholders who has due amount of the
price of paid up share. Bank can initiate the process of cancellation of share
of those shareholders who did not pay the due amount after such notice,
and bank can determine the minimum price for the share of the commercial
bank or financial institution which is insolvent or in the process of
dissolution.
(4) In case of decrease of the share capital of any commercial bank
or financial institution under Sub-section (1) or cancellation of share under
Sub-section (3) it may be ipso facto considered that amendment in the
memorandum and article of association such commercial bank or financial
institution is made accordingly.
86I. Right to Appeal Against the Order of the Bank: (1) Only the
representative of shareholders of the commercial bank or financial
institution can appeal to the committee within fifteen days against the
action, order, decision or Proceedings of the bank or the official appointed
by the bank, under Section 86C, 86D, 86E, 86f and 86h, if not satisfied
with such action, order, decision or proceedings.
Clarification: For the purpose of this Section "shareholders representative"
means representative elected among the shareholders having minimum
twenty five percent of prevailing share.
(2) No appeal will be entertained without having the representation
of twenty five percent of prevailing shares within the time of Sub-section
(1.)
(3) In case of the appeal under the provision of Sub-section (1), the
committee has to approve, review or cancel the action, order, decision or
proceedings done by the bank or the official appointed by the bank, within
thirty days of receipt of such appeal by giving related proof, basis and
reasons.
(4) Bank may provide information about the decision made under
Sub-section (3) within fifteen days of such decision to the respective
representative of the shareholders.
(5) The action, order, decision or Proceedings of the bank or the
official appointed by the bank shall remain continue unless the committee
under Sub-section (3) cancel it.
(6) The decision of the committee under Sub-section (3) on the
appeal of the shareholders representative shall be final.
86J. Transfer of the Assets and Liabilities of the Problematic
Commercial Bank or Financial Institution: (1) In case of the order
issued by the bank for the transfer of assets and liabilities partially or fully
of the problematic commercial bank or financial institution under the
provision of Clauses (b), (c) or (d) of Sub-section (3) of the Section 86F,
notifying such order to public by publication, it can be transferred to any
commercial bank or financial institution or any other body in the terms and
basis which bank think proper.
(2) Bank may provide, real, detail and information on the serious
matters about the belongings or description of assets and transaction of the
problematic commercial bank or financial institution to the prospective
commercial bank or financial institution or any body which is ready to
receive the assets and liabilities of such commercial bank or financial
institution by determining the terms of privacy.
86K. Basis for Transfer of the Assets and Liabilities: (1) Whatever may be
mentioned in the Section 86J no assets and liabilities of the problematic
commercial bank or financial institution can be transferred to any
commercial bank or financial institutions or any other body in the
following conditions:
(a) In case it is against the interest of the depositors,
shareholders, creditors or general public.
(b) In case it seems that the transaction related to the
assets and liabilities cannot be operated competently
and liabilities against the depositors, shareholders and
creditors cannot be fulfilled.
(c) In case of refusal to provide written commitment by
the recipient commercial bank or financial institution
or any other body, in the terms determined by the
bank regarding the proper use of the assets and
discharge of the liabilities.
86L. Consequence of Transfer: (1) Whatever may be mentioned in the
Companies Act or any other prevailing law, while the assets or liabilities of
any problematic commercial bank or financial institution is transferred to
any commercial bank or financial institution or any other body, the
following provision shall be applicable in the issue of the assets, liabilities,
transaction and other related matters of such commercial bank or financial
institution from the date mentioned in the order of the bank.
(a) In case of transfer of assets and liabilities of the
problematic commercial bank or financial
institution to any other commercial bank or
financial institution or any other body, all the rights
and liabilities upon such assets and liabilities shall
automatically be transferred to the recipient
commercial bank or financial institution or any
other body.
(b) In case of transfer of assets and liabilities under the
provision of Clause (a), if it is necessary to transfer
or complete other legal procedure for such transfer
the respective official have to transfer it in the name
of recipient commercial bank or financial institution
or any other body.
Provided that, such transfer of assets and liabilities
is not considered otherwise only because of not
being transfer in the name recipient.
(c) The recipient commercial bank or financial
institution or any other body which receives the
assets and liabilities of the problematic commercial
bank or financial institution, have to follow the
terms of the written commitment and directives
issued by the bank in time to time under the
provision of this Act or other prevailing law related
to commercial bank or financial institution.
(d) In case of transfer of the assets and liabilities of any
problematic commercial bank or financial
institution to any commercial bank or financial
institution or any other body, for the execution of
such it is considered that the license for banking and
financial transaction issued under the provision of
this Act shall be considered automatically amended
for the limit of transaction of transferred assets and
liabilities and license issued to the problematic
commercial bank or financial institution shall be
considered as repealed.
(e) It is considered that all responsibilities occurred
from any agreement, contract, right, right to
representation, pledge, securities, instruments, etc of
the problematic commercial bank or financial
institution which assets and liabilities are transferred
to the other commercial bank or financial institution
or any other body are transferred to the later till the
limit of transferred assets and liabilities of the
problematic commercial bank or financial
institution.
(f) The commercial bank or financial institution or any
other body which receives the assets and liabilities
under Clause (e) shall operate any action by its own
name till the limit of the assets and liabilities
transferred to it from the problematic commercial
bank or financial institution on which it was party.
86M. Finality of the Order of Transfer: Whatever may be mentioned in the
prevailing law, the order issued by the bank for the transfer of the assets
and liabilities of any problematic commercial bank or financial institution
to any other commercial bank or financial institution or any other body
under this Act shall be final.
86N. Prohibition in any Actions: Whatever may be mentioned in the
prevailing law, if bank feels necessity for the healthy development of
banking and financial system, stability and for the shake of depositors
interest bank can do following actions:
(a) Apply to the Appeal Court for the order of suspension of
hearing of civil matters for not more than six months to any
actions, transaction and related any matter or all cases on
which problematic commercial bank or financial institution is
either party.
(b) Control or capture the assets, records, account, etc of the
problematic commercial bank or financial institution.
87. Establishment of Information Network: (1) The Bank shall, in order
to promote banking and financial system of Nepal, establish and operate
information network as prescribed.
88. Establishment of Credit Information Center: (1) The Bank shall
establish or cause to establish one credit information Center for the
following purposes:-
(a) To obtain information on the flow of credit from
commercial banks and financial institutions in order
to ensure fairness and appropriateness in credit
flow;
(b) To require the exchange of the information received
pursuant Clause (a) amongst the commercial banks
and financial institutions for the purpose referred to
in that Sub-Section;
(c) To require to send the name-list of the debtors not
repaying the loan in time or misusing the loan to the
Center;
(d) To require to obtain on compulsory basis the
information from the Center prior to making
investment or advancing loan of an amount more
than the limit prescribed by the Bank;
(e) To have the name-list received pursuant to Clause
(c) blacklisted by the Center upon confirmation and
to take necessary action in this regard; and
(f) To submit report to the Bank, on the exchange of
information among the commercial bank and
financial institution and use such information while
making loan investment on the basis of inspection,
supervision and monitoring.
(2) The Bank shall regulate and manage the functions referred to in
Sub-section (1) as specified.



Chapter - 10
Balance Sheet, Auditing and Report
89. Fiscal Year: The Fiscal year of the Bank shall be as per the Fiscal year of
Government of Nepal.
90. Account System: The Bank shall maintain at all times accounts and
records adequate to reflect its operations and financial condition in
accordance with international accounting standards.
91. Annual Report: (1) The Bank shall prepare an annual report for each
fiscal year, which should include the balance sheet, profit and loss accounts
and the particulars relating to it.
(2) The Bank shall submit the annual report referred to in Sub-
section (1) to Government of Nepal within four months from the date of
completion of each fiscal year.
92. Auditing: (1) The Auditor General shall carry out auditing of the accounts
of the Bank.
(2) The Board may, if it deems appropriate, cause the internal
auditing of its accounts carried out by some external Auditor. While
causing such auditing of accounts, it shall cause to be carried out in
accordance with the account system of international practice.
93. Submission of Report to Government of Nepal: (1) The Bank shall
have to submit the following reports to Government of Nepal within four
months from the date of completion of each fiscal year:-
(a) Auditing Report,
(b) Report on its activities of itself,
(c) Report on economic and financial position,
(2) The Bank shall publish its monthly balance sheet within fifteen
days from date of completion of each month.
94. Report on Monetary Policy: The Bank shall publish the report on
monetary policy each year for the information of general public. The said
report to be published in such a manner shall contain the following
matters:-
(a) Comprehensive review and evaluation of the
monetary policy introduced and followed by the
Bank in the preceding year;
(b) Justification and analysis of the monetary policy
that the Bank is going to introduce in the following
year:-
Chapter - 11
Offences, Punishment and Proceedings
95. Acts to be Deemed to be Offence Under this Act: (1) Whoever
accepts deposits or gives credits or issues debenture or other financial
instruments in contravention to this Act or the Rules or bye-law framed
thereunder or an order or directive issued thereunder; or whoever charges
or gives interest against the policy determined by the Bank or issues fake,
fraudulent, counterfeit or duplicate or copied currency or distributes or
circulates such currency or is involved in such acts, it shall be deemed to
have committed offences under this Act.
(2) Except otherwise provided under Sub-section (1) any person who
fail to comply with the provisions made under this Act or rules made
thereunder, or bye-laws, or the order or directives issued thereunder, shall
commit offence under this Act.

96. Punishment: (1) The person convicted of offence referred to in Section
95 shall have the assets related to the offence confiscated and shall be
liable to a fine up to three times of the value of the said assets or an
imprisonment up to three years or the both.
(2) In cases where the value of the assets related to offence can not
be ascertained pursuant to Sub-section (1), a fine of up to one million
rupees or an imprisonment up to three years or both may be imposed
depending upon degree of the offence.
(3) If the offence referred to in Section 95 has been committed by
any firm, company or institution, the punishment referred to in Sub-
Sections (1) and (2) shall be imposed on the official of the said firm,
company or institution committing the offence.
(4) The person who has attempted to commit, or who is indirectly
related to the offence referred to in Section 95 or the person who has helped
to commit such offence or the official of the concerned firm, company or
organization who has helped to commit such offence shall be liable to a
punishment up to the half of the punishment prescribed for the offender of
the first degree.
97. Government of Nepal to be Plaintiff: The cases relating to the
offences referred to in Section 95 shall be filed by Government of Nepal as
plaintiff and such cases shall be deemed to have been incorporated in
Schedule -1 of the Government Cases Act, 2049 (1992).
98. Bank to Provide Information: In cases where the Bank has an
information from any source that any one has committed the offences
referred to in Section 95, the Bank shall forward such information in
writing to Government of Nepal or the concerned agency for necessary
actions.
99. Fine for Violation of Bank's Regulation: (1) In case any commercial
bank or financial institution licensed under this Act, violates an order or
directive issued by the Bank under this Act or under the regulation or Bye-
laws framed thereunder, the Bank may fine such commercial bank or
financial institution an amount up to the amount related to such violation.
(2) In cases where the Bank's regulation referred to in Sub-section
(1) has been violated by a Director, official or employee of the commercial
bank or financial institution, such fine shall be imposed on the concerned
Director, official or employee.
100. Punishment for Violation of Bank's Regulation: (1) In case any
commercial bank or financial institution licensed from the Bank, violates
an order or directive issued by the Bank under this Act or under the
regulation or bye-laws framed thereunder, the Bank may impose one or
more of the following punishment to such commercial bank or financial
institution:-
(a) Giving reprimand or written warning;
(b) Obtain an undertaking from Board of Directors
for adopting reformative measures;
(c) Issuing written order to end up frequent
violations, to abstain from such violation and to
adopt reformative measures;
(d) Suspend or terminate the services of the Bank's
employee;
(e) Prohibit commercial bank or financial institution
to distribute dividend to its shareholders;
(f) Prohibit commercial bank or financial institution
to accept deposits or to grant loan and advance;
(g) Imposing full or partial restriction on the
transaction of business of the commercial bank or
financial institution;
(h) Suspend or revoke license of the commercial bank
or financial institution.
(2) Where a Director or official or employee of a licensed
commercial bank or financial institution violates an order or directive
issued by the Bank under this Act or under the regulation or bye-law
framed thereunder or in cases where, they have acted against the interest of
the depositor or general public or where they failed to submit the
documents, particulars, data required by the Bank or the inspecting or
supervising official within the time prescribed, the Bank may impose the
following punishments to such Director, official or employee:-
(a) Giving reprimand or written admonition;
(b) Suspending;
(c) Imposing a cash fine not exceeding five hundred
thousand rupees;
(d) Giving order to the Board of Directors of concerned
commercial bank or financial institution to stop
payment of all benefits including remuneration and
allowances;
(e) Giving order to the Board of Directors of the concerned
commercial bank or financial institution to remove
Directors from his office of Director or to terminate the
services of officer or employee.
101. Procedures for Pecuniary Penalty and Punishment: (1) While
imposing pecuniary penalty or punishment pursuant to Sections 99 and
100, the Bank shall have to follow the following procedures:-
(a) Prior to imposing pecuniary penalty or punishment,
the Bank shall issue a written notice to the accused
institutions or persons stipulating the following
matters to submit its reply within fifteen days, on the
proposed fine or punishment:-
(1) Nature of the offense,
(2) Amount of fine or proposed punishment that
may be imposed on the basis of nature of
offence, and
(3) Summary of the facts related to the offence.
(b) The institution or person accused pursuant to Clause
(a) should submit written replies within fifteen days
accepting or denying the charges.
(c) In case the denial of the charge by the accused
institution or person is found to be satisfactory, the
Bank may change, limit or dismiss such charge.
(d) In case the accused institution or person accept the
charge or does not give satisfactory replies, the Bank
shall impose such fine or punishment.
(e) The Bank may issue order to deduct the amount of
fine imposed pursuant to Clause (d) from the accounts
of the concerned commercial bank or financial
institution maintained at the Bank.
(2) The cash fine to be recovered by the Bank pursuant to Clause (e)
of Sub-Section (1) shall be deposited in the general reserve fund.
(3) Notwithstanding anything contained in Sub-section (1), there is
no need to follow such procedure while imposing punishment under
Clauses (a), (b), (c) or (d) of Sub-section (1) and Clauses (a) and (b) of
Sub-section (2) of Section 100.
102. Filing Appeals: The commercial bank or financial institution or the
director or official or employee thereof not satisfying with the punishment
imposed by the Bank under Sections 99 and 100 may, within thirty five
days from the date of punishment, file an appeal at the Appellate Court.




Chapter - 12
Miscellaneous
103. Payment, Clearing and Settlement: (1) The Bank shall make
necessary arrangement for the clearing and settlement of cheques, payment
orders, inter bank payment security transactions made in the currencies
prescribed by the Bank and any other payment instrument and carry out the
functions of regulation, inspection and supervision thereof.
(2) While carrying out the functions referred to in Sub-section (1),
the Bank may prescribe necessary procedures.
(3) For the purpose of clearing and settlement arrangement referred
to in Sub-section (1), the commercial bank or financial institution shall,
subject to the terms and conditions prescribed by the Bank, open account in
the Bank or any other financial institution prescribed by the Bank.
104. Collection of Data: (1) The Bank shall, in order for achieving its
objectives or carrying out its functions, collect data necessary for it from
itself or from Government of Nepal or other agencies. For this purpose, the
Bank may seek help from the authorized persons, institution, organization
within and outside the Kingdom and international association and
organizations.
(2) The Bank may make necessary provisions for coordination and
reformation in the system of collection, storing and distribution of data
relating to its area of competence.
105. Trust Accounts: The Bank may, for special purposes, open and operate
separate account in the form of trust account. The amount collected in such
account shall not be used for any other purposes. The property in such
account shall be used only for the purpose of fulfilling the liabilities of such
accounts and the Bank shall not be allowed to use the amount or property
in other accounts for fulfilling such liabilities.

106. Actions not to be Invalid: None of the actions taken by the Bank or the
Board shall be invalid merely for the reason that there was irregularity in
the appointment of Governor, Deputy Governor or Director or in the
formation of the Board or simply on the ground that the office of the
Governor, Deputy Governor or Director has remained vacant.
107. No Responsibility for Acts Done on Good Faith: (1) Governor,
Deputy Governor, Director or any official or employee of the Bank shall
not be personally or collectively liable for any act done on good faith under
this Act and under the Regulations or Bye-laws or under an order or
directive issued thereunder.
Provided that for any act done knowingly or with mala fide intention, they
shall be personally liable.
(2) In case a lawsuit of any type has been filed against the Governor,
the Deputy Governor, Director or any official of the Bank with regard to
any loss sustained or to be sustained because of any act done or attempted
to do in good faith pursuant to this Act or under the Regulations or Bye-
laws framed thereunder or an order or directive issued thereunder, the Bank
shall bear expenses incurred therefor.
Provided that the Bank shall not bear the expenses incurred for the
lawsuit filed against any act done knowingly or with mala fide intention.
108.
Oath of Office: (1) Before assuming their office, the Governor and
Director before the chief justice of the Supreme Court or justice prescribed
by him/her and Deputy Governor before the Governor, shall take an oath of
post and secrecy as determined in the schedule.
(2) Any employee or advisor appointed first time in the bank should
take an oath of post and secrecy as prescribed, before resuming his post.
109. This Act to be Applicable: Notwithstanding anything contained in the
prevailing laws, provisions contained in this Act shall prevail.
110. Power to Frame Rules and Bye-laws: (1) In order to implement the
objectives of this Act, the Bank shall, having obtained approval of
Government of Nepal, frame necessary Rules on the following matters:-
(a) Foreign Exchange Transaction;
(b) Refund of the burnt, torn, defaced or mutilated
banknotes and coins;
(c) Transaction of business between Government
of Nepal and the Bank;
(d) Other necessary matters which bank thinks
necessary to implement the objective of this
Act.
(2) In order to implement the objectives of this Act, the Board may
frame byelaws on the following matters:-
(a) The venue and time of the meeting of the Board
and procedures relating thereto,
(b) Formation of sub-committees by the Board as
per necessity and procedures of such sub-
committees,
(c) Appointment, promotion, transfer, dismissal,
remuneration and facilities, pension, gratuity,
provident fund, leave, conduct and discipline
and terms and conditions of service, of the
employees of the Bank,
(d) Delegation of authority by the Board to the
Governor, by the Governor to the Deputy
Governor or other employees of the Bank,
(e) The terms and conditions for the lease
agreements to be concluded on behalf of the
Bank,
(f) The use of the seal of the Bank,
(g) The accounts, ledger, registrars, books and
other record and documents to be maintained
by the Bank and the format thereof,
(h) Internal auditing and inspection of the Bank,
(i) Supervision of commercial banks and financial
institution,
(j) The particulars to be submitted by commercial
banks and financial institutions,
(k) Cash deposit of the Bank or responsibility of
the cash,
(l) The case to be filed on behalf of the Bank or
operation of other transaction of business,
(m) Credit control,
(m) The Bank's system of expenditure,
(n) Other necessary subjects, which are necessary
to implement the objective of this Act.
(3) Except the subject matters referred to in Sub-Sections (1) and
(2), the Governor shall issue the order, direction, procedures and guidelines
to be issued under this Act.
(4) The Bank shall forward, for information of Government of
Nepal, the Bye-law framed under Sub-section (2) and the order or directive
issued under Sub-section (3).
(5) The Bank shall publish and transmit the bye-law framed under
Sub-section (2) or an order or directive issued under Sub-section (3).
111. Guidelines to be Framed and Introduced: The Bank may, in order to
fulfill the objectives of the Act, frame and introduce necessary guidelines
from time to time subject to this Act, or Regulations or bye-laws frame
under this Act.
112. Repeal and Saving: (1) The following Acts have been repealed:
(a) The Nepal Rastra Bank Act, 2012 (1955);
(b) The Currencies Act, 2040 (1983);
(2) All acts and activities carried out in accordance with the Acts
repealed under Sub-section (1) shall be deemed to have been carried out in
accordance with this Act.


erted by Nepal Rastra Bank (First Amendment) Act, 2063