Banks and Financial Institution Act, 2073 (Part-1)
This Act has been introduced to increase the trust of the general public over banking and financial institution, to promote the rights and interest of depositors, to provide quality and reliable banking and financial intermediary service to the general public, to promote healthy competition among banks and FIs, minimizing risks related to banks & FIs, to boost the economy of Nepal via stable banking system & to make necessary rules & regulation for supervising and inspecting the banks & FIs.
Chapter-1: Preliminary
1. Short Title, Extension & Commencement
(a) The name of the Act shall be “Banks & Financial Institution Act, 2073”.
(b) This Act shall apply to the whole of Nepal and the offices/branches of banks & FIs opened in a foreign country by banks & FIs registered in Nepal.
(c) This Act shall come into force immediately.
2. Definitions
Please see the Act for the same.
Chapter-2: Incorporation of Banks & FIs
3. Incorporation of Banks & FIs
1. Any person who wants to incorporate a BFI to carry on the banking & financial transactions under this Act may do so by getting such BFIregistered as a public limited company as per the prevailing law.
However, banks & FIs already in operation shall not be required to get registered as per this subsection.
2. The authority empowered to register a company shall register under Section 3(1) subject to Section (4).
4. Approval to Incorporate BFI
1. Concerned person shall, before applying for registration u/s 3(1), apply for the approval of NRB by submitting the following documents & paying the fee prescribed:-
a. MOA of proposed BFI;
b. AOA of proposed BFI;
c. Feasibility study report of proposed BFI;
d. Personal details of promoters as per the format prescribed by NRB;
e. A certified copy of agreements between promoters before the incorporation of Bank about the incorporation if any;
f. Details of sources of investment along with tax clearance certificate of the Fiscal Year (FY) before the FY of making the application, of the promoters;
g. Details whether the promoters are insolvent or not either in Nepal or Foreign, have borrowed any sum from any BFI, have been blacklisted or not if blacklisted whether 3 years have been lapsed or not;
h. Self-declaration by the promoter regarding no cases of fraud or any act which is regarded as an offense as per the prevailing law is not instituted or not penalized on the same, either in Nepal or in any other country;
i. Details whether the promoters have been punished or penalized by any inspecting or supervising authority or officer, whether the license of organization or company in which promoters are involved has been suspended or canceled, or forced punishment or in the process of same;
j. Details of the family of the promoter specifying the name & relationship of promoters, or if promoters are involved in an organization as shareholders, directors, or employee, details including the level of each promoter;
However, in case the promoter is a firm or company, the details of major partners or shareholders having substantial interest and influence in the said firm or company, audit report and tax clearance certificate for previous 3 FYs;
k. A written power of attorney in favor of NRB, to enable NRB, to verify or cause to verify the financial & business history of the promoters and exchange information on the same;
l. Assurance from the promoter regarding the insurance of deposit up to the level prescribed by NRB;
m. Any other details and documents as prescribed by NRB from time to time.
2. NRB, if it deems appropriate, may within 120 days from the receipt of application along with prescribed details and documents as per sub-section (1) give the approval with or without specifying any conditions thereon.
3. Notwithstanding anything contained in sub-section (2), no approval shall be given to the firm or company for the incorporation of BFI, in the case following person or his/her family members is having substantial interest in the said firm or company:-
a. Punished during the regular supervision and inspection;
b. Punished on banking offense;
c. Punished on offense related to fraud;
d. Punished on offenses related to money laundering and financing terrorists activate;
e. Punished on offense related to corruption;
f. Punished on offense related to human trafficking, kidnapping, rape, or such other serious offenses.
5. Prior Approval for incorporating BFI on Foreign Investment
1. For the purpose of pre-approval of NRB to establish a BFI by a foreign BFI in joint investment with a corporate body incorporated in Nepal or Nepalese Citizen under this Act, shall submit following additional information & documents along with prescribed fee in addition to details u/s 4(1):-
a. MOA, AOA, copy of the certificate of registration in a foreign country & capital structure of foreign BFI;
b. Copy of license to carry on banking & financial transaction in the foreign country of foreign BFI;
c. Details of principal place of business;
d. Certified copy of audited financial statements (Balance Sheet, Profit & Loss A/c) of previous 3 financial years of foreign BFI;
e. Details regarding the proposed business plan in Nepal, business strategy and category of the transaction to be carried on, internal control & risk management policy;
f. Minute of Board of foreign BFI deciding for incorporating BFI in Nepal and approval provided by the regulating authority of such country;
2. NRB, if it deems appropriate, may within 120 days from the receipt of application along with prescribed details and documents as per sub-section (1) give the approval for incorporating BFI by investing in share capital up to the limit specified by it or on joint investment with or without specifying any conditions thereon.
3. Foreign BFI after obtaining prior approval from NRB on fulfilling the procedures specified by NRB can, on joint investment invest in the share of any Nepalese BFI.
4. Notwithstanding anything contained in this Act, any investment by foreign BFI in BFI established in Nepal after obtaining the approval of NRB before the enactment of this Act shall be deemed to be invested as per this law.
6. Prior Approval to Open a Branch of BFI
1. Prior approval of NRB shall be obtained before opening any branch or office by International Rated foreign BFI in Nepal for carrying out banking & financial transaction or any non-banking financial transaction.
2. Application along with prescribed fee and capital shall be submitted to NRB.
3. While submitting the application as per sub-section (2), the following documents and details shall be submitted in addition to the documents and details u/s 5(1):-
a. A written assurance from the BOD of such foreign BFIstating that the amount required to settle all the liabilities during the operation of branch or contact office or agency shall be provided as required by NRB;
b. Details of the address of proposed branch office of such foreign BFI;
c. Details of employees of proposed branch office of such foreign BFI;
4. NRB after verifying the details and documents as per sub-section (3), if deems necessary, may call for additional details and documents.
5. NRB, if it deems appropriate to grant approval, may do so, after verifying additional documents as per sub-section (3) and documents as per sub-section (4), within 120 days from the date of receipt of application with or without prescribing any conditions thereon.
6. Such foreign BFI shall open branch office as per the prevailing law of company after obtaining approval as per sub-section (5).
7. Branch office of foreign BFI shall after registering as per sub-section (6), apply to NRB for obtaining approval for carrying on banking and financial transaction in Nepal, accompanying with the following documents and details along with prescribed fees:-
a. Certificate of Incorporation as per prevailing companies law;
b. Approval for incorporating branch office in Nepal from the foreign government, central bank, or supervising or regulating authority of such foreign BFI;
c. Details of any deviation (if any), of any things that should have been followed as per this Act, from the date of application to NRB or pre-approval from NRB;
d. Any other details as required by NRB.
8. NRB may, within 90 days from the date of application for approval for carrying on banking and financial transaction, grant approval after verifying application as per sub-section (7).
9. NRB can prescribe necessary conditions while granting approval as per sub-section (8).
10. Bank & FI can, after obtaining approval from NRB, open a branch office outside Nepal.
11. NRB may, from time to time, issue a necessary policy for opening branch offices outside Nepal as per sub-section (10).
7. Power to Refuse to Grant Approval
1. NRB can refuse to grant approval for incorporating BFI in the following situations:-
a. Name of the proposed BFI or banking and financial transaction to be carried on by it appears to be inappropriate given public interest, religion, caste, community, etc.;
b. The objectives of the proposed BFI is contrary to any prevailing law;
c. Incorporation of proposed BFI is technically infeasible;
d. If on the study of feasibility report, details and documents and other infrastructure submitted by the proposed BFI, no ground for believing that it can carry on banking and financial transactions in a healthy & competitive manner appear;
e. All promoters have not declared their name, address along with shares to be subscribed in the presence of witnesses, and not signed the MOA and AOA of proposed BFI;
f. Share investment per person and share capital structure is not as prescribed by NRB from time to time;
g. If found against the policy/circular of incorporation and approval as issued by NRB;
h. Conditions stipulated by NRB did not comply.
2. If the pre-approval of the proposed BFI is to be denied based on subsection (1), NRB shall notify the applicant specifying the grounds for denial.