2
4. Authority to issue Passport: A Passport may only be issued by the Government
of Nepal or Nepalese Embassy or any other Mission stationed in any foreign
countries which are so authorized for the same by the Government of Nepal.
Provided that,
Whosoever receives or attempts to receive a passport providing false
statement or false details, or visits or attempts to visit a foreign country in against
of Section 3, or does not abide by the order or direction issued by the Government
of Nepal, or misuses the purpose of the passport, or provides his/her passport to
any other person for other’s use, or uses others passport, or commits any act which
is in against of this Act or Rules framed hereunder, may be punished with an
imprisonment up to one year or fined up to Five Thousand Rupees or with both.
(1) The Government of Nepal shall be
the plaintiff in the case which is to be filed for an offence punishable under
Section 5 and such cases shall be filed before the court by the police with at least
the rank of Inspector.
(2) If there is any reasonable doubt for committing or attempting to commit
an offence pursuant to Section 5 by a person, any police personnel shall arrest
such person even without a warrant and produce such person before his/her
authority at least an Inspector
March 27, 2019 (2075.12.13)
Act No. 34 of the year 2075 (2018/19)
An Act Made to Amend and Consolidate Laws Relating to Foreign Investment and Technology Transfer
Preamble: Whereas, it is expedient to amend and consolidate the prevailing Nepal laws relating to foreign investment and technology transfer in order to make national economy competitive, strong and employment-oriented through mobilization to the maximum extent of the available means and resources for economic prosperity of the country, and to achieve sustainable economic growth through industrialization while creating investment friendly environment to attract foreign capital, technology and investment in the sectors of import substitution, export promotion, through increase in productivity, and of infrastructure development and production of goods or services;
Now, therefore, be it enacted by the Federal Parliament.
(2) Sections 10 and 11 of this Act shall commence on such a date as appointed by the Government of Nepal by a notification in the Nepal Gazette, and other Sections shall commence forthwith.
(a) “Industry” means any industry established in accordance with the prevailing law relating to industrial enterprises.
(b) “One Stop Service Center” means the One Stop Service Center established in accordance with the prevailing law relating to industrial enterprises.
(c) “Non-resident Nepali” means a person holding the non-resident Nepali identity card in accordance with the prevailing law relating to non-resident Nepalis.
(d) “Prescribed” or “as prescribed” means prescribed or as prescribed in the Rules framed under this Act.
(e) “Securities Board” means the Securities Board of Nepal established in accordance with the prevailing law relating to securities.
(f) “Technology transfer” means any transfer of technology to be made under an agreement between an industry and a foreign investor on the following matters:
(1) Patent, design, trademark, goodwill, technological specificity, formula, process,
(2) User’s license, technological know-how sharing or use of technological knowledge (franchise),
(3) Provision of foreign technical adviser, management and marketing service or other technological skill or knowledge.
(g) “Board” means the Industry and Investment Promotion Board referred to in the prevailing law relating to industrial enterprises.
(h) “Ministry” means the Ministry of Industries, Commerce and Supplies
(i) “Investment Board” means the Investment Board referred to in the prevailing law relating to the Investment Board.
(j) “Foreign investment” means the following investment made by a foreign investor in an industry or company:
(1) Share investment in foreign currency,
(2) Re-investment in an industry of dividends derived from foreign currency or shares,
(3) Lease finance made in accordance with Section 6,
(4) Investment made in venture capital fund in accordance with Section 9,
(5) Investment made in listed securities through secondary securities market in accordance with Section 10,
(6) Investment made by purchasing shares or assets of a company incorporated in Nepal,
(7) Investment received through the banking channel after issuing securities in a foreign capital market by an industry or company incorporated in Nepal in accordance with Section 11,
(8) Investment made through technology transfer, or
(9) Investment maintained by establishing and expanding an industry in Nepal.
(k) “Foreign investor” means any foreign individual, firm, company, Non-resident Nepali or foreign government or international agency or other corporate body of similar nature that makes foreign investment, and also includes, in the case of a foreign investor that is an institutional foreign investor, the ultimate beneficiary of such an institution.
(l) “Foreign investment approving body” means the body referred to in Section 17.
(m) “Department” means the Department of Industries.
(n) “Institutional foreign investor” means a foreign company, corporate body or international institution that makes foreign investment.
Foreign investment may be made: (1) A foreign investor may make foreign investment in any industry and derive gains from such investment.
(2) Notwithstanding anything contained in sub-section (1), no industry operated with foreign investment may make foreign investment of profits earned or in any other manner, in any industry referred to in the Schedule.
Provided that technology transfer may, with the approval of the Department, be made in an industry referred to in the Schedule which is established with Nepali investment.
(3) Notwithstanding anything contained in sub-section (1), approval shall not be given for making foreign investment in any industry of an amount that is less than the amount specified by the Government of Nepal by a notification in the Nepal Gazette.
(2) The terms of technology transfer to be made pursuant to sub-section (1) shall be as specified in the technology transfer agreement entered into between the concerned industry and the foreign investor.
(3) The agreement referred to in sub-section (2) may not provide for the repatriation of royalty in excess of the prescribed ceiling.
(4) The agreement referred to in sub-section (2) has to be got approved by the foreign investment approving body.
(5) The foreign investment approving body may, in giving approval pursuant to sub-section (4), specify the necessary terms on the basis inter alia of international practices on foreign investment and production and selling capacity of the industry.
(2) Other provisions relating to establishment or expansion of a branch of the industry pursuant to sub-section (1) shall be as prescribed.
(2) An approval shall have to be obtained by fulfilling the procedures referred to in Section 15 for the investment in an industry from the fund referred to in sub-section (1).
(3) Such a company shall provide the statements of the venture capital fund referred to in sub-section (1) to the Department in every six months.
(4) Other provisions relating to the fund established pursuant to sub-section (1) shall be as prescribed.
(2) The foreign investor registered in the Securities Board pursuant to sub-section (1) may, through the secondary securities market, trade in securities of an industry in which foreign investment may be made pursuant to this Act.
(3) In carrying on trading in securities pursuant to sub-section (2), the minimum number of securities to be purchased, the ceiling of investment, minimum period for which it has to held the securities after the purchase, reserve fund to be held in foreign currency for purchasing securities and other provisions related thereto shall be as prescribed.
(2) A company which is incorporated with foreign investment in Nepal may, subject to the prevailing law relating to securities, borrow a loan by issuing securities within Nepal.
(3) A loan borrowed or foreign currency acquired by issuing securities pursuant to sub-sections (1) and (2) shall have to be invested in Nepal.
(4) Other provisions relating to the issuance of securities referred to in this Section shall be in accordance with the prevailing law relating to securities.
(2) Notwithstanding anything contained in sub-section (1), in the case of service industry, the maximum ceiling of equity foreign investment and ceiling of investment to be made in securities pursuant to Section 10 may be so prescribed as not to be lesser than the commitment made by Nepal in respect of the concerned sector or sub-sector at the time of obtaining membership of the World Trade Organisation.
Explanation: For the purposes of this Section, the term “escrow agreement” means an agreement by which the contracting parties agree to the effect that any amount, documentary evidence shall be handed over to any third party for the security of transaction between them or as a security for any guarantee, and such amount, documentary evidence or guarantee shall be provided to the concerned party after the completion of contractual obligations by the contracting parties.
(2) A bank executing an escrow agreement pursuant to sub-section (1) shall act as an agent of the parties to the agreement.
(3) Other provisions relating to an escrow agreement to be made pursuant to sub-section (1) shall be as prescribed.
(2) If, in examining an application received pursuant to sub-section (1), it appears that such documents as prescribed have been completed, the Foreign Investment Approving Body shall give approval for foreign investment in such a form as prescribed within period of seven days of the date of receipt of the application.
(3) An industry which has obtained approval pursuant to sub-section (2) wishes to make investment from the eared profits in the same industry or in any industry other than that referred to the Schedule, it is not necessary for it to re-obtain approval on foreign investment.
Provided that the natter requiring license or permission under the prevailing law for the purpose of registration of an industry or company or tax or any other business shall be governed accordingly.
(4) If any industry is established or the structure of ownership of any industry is changed because of foreign investment, in accordance with sub-section (3), such an industry shall give information thereof to the Department and the Nepal Rastra Bank. On receipt of such information, the Department shall maintain records thereof.
(5) If, in examining the application pursuant to sub-section (2), it appears that approval cannot be given, the Foreign Investment Approving Body shall give information thereof in writing, setting out the ground and reason therefor, to the applicant within a period of seven days.
(6) If, upon receipt of information in accordance with sub-section (5), the concerned investor is not satisfied with the decision made by the Department, such an investor may make an application to the Ministry for the review of the decision.
(7) The Ministry shall, upon making necessary examination of the application received pursuant to sub-section (6), make a decision thereon within a period of thirty days.
(2) A foreign investor shall bring the amount to be invested in convertible foreign currency through the banking system upon completion of such procedures as determined by the Nepal Rastra Bank.
Provided that an Indian investor may also make investment of such amount in Indian currency through the banking channel.
(3) Notwithstanding anything contained in sub-section (3), lease investment referred to in Section 6 and loan investment made by issuing securities referred to in Section 11 shall be as prescribed.
(2) The Investment Board under the Investment Board Act, 2011 (2068) shall approve the foreign investment exceeding six billion Rupees.
(2) A foreign investor which has already obtained approval for making foreign investment in accordance with the prevailing law, at the time of the commencement of this Act, shall also make investment of the prescribed minimum amount with the period prescribed pursuant to sub-section (1).
(3) The approval giving body may revoke the investment approval given to an industry that fails to make investment within the period referred to in sub-section (1) or (2) or Section 43, except in case of reasonable grounds.
(2) In the case of change in the ownership of the industry subject to foreign investment in Nepal as a result of the transfer of title to any property, assets, shares or any other financial equipment of any holding company, the concerned branch industry or unit of the industry shall have the liability to give information referred to in sub-section (1).
(3) In the case of a transaction in accordance with sub-section (1), it shall not be recorded pursuant to sub-section (1) until tax is paid by the concerned industry, upon setting out the amount of transaction, in accordance with the prevailing law.
(4) Other provisions relating to the sale of and transfer of title to shares shall be as prescribed.
(2) A foreign investor may repatriate the following amount in the same foreign currency in which the investment has been made or other convertible foreign currency with the approval of the Nepal Rastra Bank, after paying the tax related liabilities under the prevailing law:
(a) Amount received from the sale of shares with foreign investment,
(b) Amount of profit or dividend received from foreign investment,
(c) In the case of liquidation or winding up of the industry or company, amount remaining after paying all liabilities following the liquidation or winding up,
(d) Amount of royalty received under the technology transfer agreement,
Provided, however, that in the case of the royalty or fee for the use of a trademark under the transfer of technology in a liquor industry other that a liquor industry exporting cent percent of liquor, the amount of such royalty shall not exceed five percent of the total selling price, as prescribed, excluding the prevailing tax.
(e) Amount of lease rent under the lease investment,
(f) Amount received as damages or compensation, if any, received from the final settlement of a law suit, arbitration or any other legal process in Nepal,
(g) Amount that can be repatriated in accordance with the prevailing law.
(3) In repatriating amount in a convertible foreign currency in accordance with sub-section (1) or (2), it shall be repatriated by making conversion at the prevailing exchange rate.
(4) Where any foreign investor has lent a loan to any industry or company against the pledge or mortgage of a movable or immovable property situated in Nepal and the movable or immovable property pledged or mortgaged required to be auctioned or forfeited because of nonrepayment of the principal or interest of such a loan, the institution lending such a loan may repatriate the principal and interest of the loan by auction of such property as if it were a bank or financial institution of Nepal.
(5) In the case of termination of a lease agreement because of non-payment in accordance with the lease agreement or breach of its terms, the foreign investor may repatriate its investment and the property invested in the lease.
(6) A foreign investor who wishes to repatriate the foreign investment or amount earned therefrom in accordance with this Section shall make an application, in the form as prescribed, to the foreign investment approving body for approval to that effect.
Provided, that such an application shall be made to the Single Stop Service Centre, if the Government of Nepal, by a notification in the Nepal Gazette grants to the Single Stop Service Centre, the power to the body to give approval relating to repatriation of foreign investment or amount earned therefrom.
(7) If, in examining an application received pursuant to sub-section (6), it appears that the foreign investor has fulfilled the terms and liabilities referred to in this Act, prevailing law and the agreement made in relation to foreign investment, the foreign investment approving body shall give approval to repatriate the foreign investment or amount earned therefrom not later than fifteen days of the date of receipt of the application.
(8) After obtaining the approval pursuant to sub-section (7), the foreign investor may make an application to the Nepal Rastra Bank for the foreign currency exchange facility.
(9) The Nepal Rastra Bank shall, upon receipt of an application in accordance with sub-section (8), provide the exchange facility to the foreign investor for the repatriation of foreign investment.
(10) Where the amount of investment is to repatriated by selling wholly or partly any industry with foreign investment or upon revocation of the registration of the industry or company for any reason, repatriation of the remaining amount may be made only after the payment or settlement of all liabilities including the tax payable by such an industry.
(11) Notwithstanding anything contained elsewhere in this Section, a foreign investor may, in repatriating foreign investment made in any industry in accordance with this Act or profit earned therefrom, repatriate such investment or profit only to the extent of the ratio of the portion of its investment in the concerned company.
(12) If any foreign investor is not satisfied with a decision made by the body giving such approval in the course of repatriation of the amount of its investment, the investor may make an application to the Ministry. The Ministry shall make a decision on such an application within thirty working days.
(a) To give suggestions to the Government of Nepal for such policy, institutional and procedural reforms as may be required to be made for the attraction of foreign investment in industrial and infrastructure development,
(b) To set such strategies and programs as may be required for the enhancement of attraction of foreign investment in Nepal and promotion and protection thereof,
(c) To give approval for the establishment of industries and infrastructures with foreign investment, and promote foreign investment,
(d) To facilitate for foreign investment by enhancing, expanding and protecting foreign investment,
(e) To make coordination at the policy and implementation levels of foreign investment,
(f) To assist in the implementation of policies and laws relating to foreign investment,
(g) To make arrangements for the provision of services to foreign investors from the Single Stop Service Centre,
(h) To obtain information as to whether activities of giving approval for foreign investment and delivery of services have been carried out properly, and give necessary direction to the concerned body,
(i) To make facilitation, if there arises any problem in respect of the repatriation of foreign investment or amount earned, as referred to in Section 20 or implementation of this Act or the rules framed under this Act, in that respect,
(j) To perform, or cause to be performed, such other functions as prescribed.
(a) To create conducive environment for the establishment and operation of industries to be established with foreign investment,
(b) To facilitate foreign investors to obtain any approval or permission including initial environmental assessment, environmental impact assessment in accordance with the prevailing law,
(c) To maintain updated records of foreign investments approved or permitted in accordance with this Act or the prevailing law and of the technology transferred in Nepal, update such records and make the same public periodically,
(d) To give approval for foreign investors, and foreigner experts, technicians or managerial employees who are engaged in the industries with foreign investment pursuant to Section 27 to repatriate investment and remuneration,
(e) To make and enforce Standard Operating Procedures in order to make foreign investment transparent and to make procedural simplification,
(f) To make recommendation for visas to the foreign investors and their authorised representatives, and foreign experts, technical or managerial employees engaged in industries with foreign investment in accordance with Section 27 and minor members of their family, and make facilitation for that purpose.
(g) To make regular supervision and monitoring as to whether any industry with foreign investment has misused any facility granted in accordance with this Act,
(h) To facilitate industries with foreign investment in establishing industries in an industrial zone or special economic zone,
(i) To perform, or cause to be performed, such other functions as prescribed.
(2) In managing the services to be provided through the Single Stop Service Centre pursuant to sub-section (1), necessary provision shall be made so that the following services are provided gradually:
(a) Registration and administration of industries,
(b) Approval of foreign investment and loan,
(c) Registration and administration of companies,
(d) Labour permit,
(e) Visa facility,
(f) Testing and control of quality of goods produced by industries,
(g) Approval of environmental study report,
(h) Energy and infrastructure development, and necessary coordination for that purpose, as well as focal point among other bodies,
(i) Exemptions, facilities to which industries are entitled,
(j) Provision of permanent account number,
(k) Foreign exchange approval,
(l) Any service related to such other functions as may be required to be performed for industries in accordance with this Act and the Regulation framed under this Act.
(3) It may be so prescribed that the Single Stop Service Centre may provide other services referred to in the prevailing law, in addition to the services, facilities to be provided pursuant to this Section.
Facilities to be obtained by industries: (1) In addition to the exemptions, facilities, concessions or protection referred to in this Act, be provided to any industry with foreign investment, such exemptions, facilities or concessions as may be available under the prevailing Industrial Enterprises Act and other prevailing law shall.
(2) Notwithstanding anything contained in sub-section (1), such facilities to which a sick industry is entitled in accordance with the prevailing law shall not be available to any industry with foreign investment.
Provided, however, that approval of the Nepal Rastra Bank shall be obtained to carry on transaction by opening an account in convertible foreign currency.
(2) An industry with foreign investment may, in order to mitigate the foreign currency exchange fluctuation risk, use any approved derivatives equipment through a bank or financial institution.
(a) To pay such remuneration as may be payable to any foreign expert, technical or managerial employee employed in the industry in accordance with Section 27,
(b) To pay the principal or interest of any bonds or debentures issued in accordance with sub-section (1) of Section 11,
(c) To repatriate the foreign investment or income earned in accordance with Section 20.
(2) After obtaining approval from the Nepal Rastra Bank in accordance with sub-section (1), an industry with foreign investment may pay or use such amount as approved from the foreign currency held in the account of such industry as referred to in Section 25.
(3) Any foreign expert, technical or managerial employee employed in an industry in accordance with Section 27 may repatriate to his or her country in convertible foreign currency such amount of saving out of the remuneration receivable by him or her, after paying income tax in Nepal in accordance with the prevailing law.
(4) The exchange or repatriation of convertible foreign currency in accordance with sub-section (2) or (3) shall be made according to the open market exchange rate.
(2) Notwithstanding anything contained in sub-section (1), if an industry with foreign investment cannot fulfil the positions of experts in its top-level management, high-level technical, managerial employees or technical employees from amongst the Nepali citizens and it is necessary to transfer technical knowledge or skill through any technical or expert of another country in such an industry, the industry may employee any foreign citizen in accordance with the prevailing law.
(3) The concerned industry shall provide details relating to the foreign citizens employed in accordance with sub-section (2) to the Department. The Department shall provide the details also to the Ministry of Finance, Ministry of Home Affairs and Ministry of Labour, Employment and Social Security.
(4) The employees and workers employed in any industry with foreign investment in accordance with sub-section (2) shall comply with the terms and conditions referred to in the prevailing Nepal law.
(2) The business visa shall be granted to a foreign investor or one authorized representative of him or her and the family members of such an investor or representative to stay in Nepal until the foreign investment equal to such minimum amount as prescribed is maintained.
Explanation: For the purpose of this Section, the term “family member” means the husband or wife, father, mother and minor son, daughter of the foreign investor or his or her authorized representative.
(3) Notwithstanding anything contained in sub-section (2), in the case of an investor who makes investment exceeding the prescribed amount, such facility shall be provided only to a maximum of two persons and his or her family member.
(4) The residential visa shall be provided to a foreign investor who makes foreign investment in an amount exceeding one million US dollars or in convertible foreign currency equivalent thereto at one time or to the authorised representative of him or her and the family member of such a person until the foreign investment equal to such minimum amount as prescribed is maintained.
(5) The tourist visa shall be provided to any foreign expert, technical or managerial employee to be employed in an industry in accordance with Section 27.
(6) The body giving working approval and work permit for the non-tourist visa shall make decision whether or not to give working approval or work permit, after completing the necessary procedures not later than fifteen days.
(7) Other provisions relating to visa facility shall be as prescribed.
(2) Notwithstanding anything contained in sub-section (1), if a foreign investor is unable to purchase or manage the necessary land on his or her own for the operation of the industry as prescribed and makes a request, setting out the content, for the purchase or acquisition of the land, the foreign investment approving body shall make necessary recommendation, coordination and facilitation for that purpose.
(3) If such land as in excess of the ceiling is required for an industry which is operated or to be operated with foreign investment, for the establishment and operation of the industry, the body registering the industry shall make necessary recommendation, coordination and facilitation in accordance with the prevailing law. The land that is not subject to such ceiling shall be used only for the same purpose for which it has been purchased.
(4) Other provisions relating to the provision of land in lease to an industry with foreign investment and to the ceiling of land shall be in accordance with the Industrial Enterprises Act and the prevailing law.
(5) Other provisions relating to the land to be provided to any industry to be operated with foreign investment shall be as prescribed.
(2) Notwithstanding anything contained in sub-section (1), in the case of a foreign investment approved prior to the commencement of this Act, the provisions contained in the prevailing law relating to foreign investment in force at the time of making such an investment shall apply, and no change shall, without his or her consent, be made that may prejudice to any facility obtained by any foreign investor in accordance with that law.
(3) The following protection shall be accorded to any industry with foreign investment in accordance with sub-section (1):
(a) The industry, enterprise with foreign investment shall be accorded the same treatment as accorded to any industry of the same nature with investment made by a Nepali citizen.
(b) The industry, enterprise with foreign investment shall be free to determine the price of goods and services, subject to the prevailing law.
(c) No industry, enterprise with foreign investment shall be prevented from doing trade, as prescribed, being limited to that industry.
(d) No industry, enterprise with foreign investment shall be restricted to repatriate profit, investment, pay interest of, and repay the principal of, a loan.
(4) Notwithstanding anything contained in sub-section (1), national treatment shall not apply in respect of the following matters:
(a) Matters relating to the creation of such intellectual property rights, limits thereof, transfer of title thereto or provisions requiring compulsory licensing for the use thereof as specified in any agreement made under the World Trade Organisation,
(b) Matters relating to the exemption or facility, if any, granted to any domestic industry or goods in accordance with the prevailing Nepal law relating to public procurement,
(c) Matter relating to any grant or concession to be made or provided by the Government of Nepal,
(d) Matter of non-commercial services to be provided by the Government of Nepal,
(e) Such measures relating to financial services as may be adopted or managed by the Government of Nepal upon considering appropriate on matters such as matters relating to the protection of investors, participants in the securities market, insurance policy holders or insurance policy claimants, or relating to financial institutions having liability to safeguard the financial interests of any persons or relating to maintaining soundness, morality or financial responsibility of financial institutions,
(f) Matters involving liability or provision to accord special treatment by the Government of Nepal because of being a party to any regional or multilateral economic, monetary organisation or organisation of similar nature to which the Government of Nepal is or will be a party,
(g) Matters relating to the terms that may be specified by the regulatory body in accordance with the prevailing law in respect of repatriation of investment to a foreign country, repayment of loan (including principal, interest and fees), payment of service fees,
(h) Matters relating to the protection of human, animal and plant health or the environment.
(2) No industry shall, except for a public purpose, be expropriated directly or indirectly. If it is required to expropriate it for the public purpose, due process referred to in the prevailing law shall be fulfilled.
(2) The Department shall address, as prescribed, the grievance received in accordance with sub-section (1).
(3) If a foreign investor or industry has any grievance with respect to any act or action performed by the Department or Single Stop Service Centre, such an investor or industry may make an application, setting out the content, to the Ministry for its hearing.
(4) The Ministry shall address, as prescribed, the grievance received in accordance with sub-section (3).
(2) The officer who makes monitoring and inspection in accordance with sub-section (1) shall, not later than three days after the date of completion of the monitoring and inspection, give a report to the Department, setting out the details inter alia whether or not the foreign investor or industry has done any act contrary to Section 36.
(3) Other provisions relating to monitoring and inspection of the industry shall be as prescribed.
(2) The agreement referred to in sub-section (1) shall provide for, inter alia, the terms of joint, distribution of profits earned from the investment and settlement of disputes relating to investment.
(2) If the dispute cannot be settled through the process referred to in sub-section (1) within a period of forty-five days after the dispute has arisen, and a joint investment or dispute settlement agreement exists between the parties to the dispute for the resolution of such a dispute, the dispute shall be settled in accordance with such an agreement.
(3) The parties shall give information about the settlement of the dispute in accordance with sub-section (2) to the Foreign Investment Approving body not later than fifteen days of its settlement.
Provided, that the parties shall not be bound to give information about on what terms and conditions such a settlement has been made.
(4) If the agreement concluded between the parties in accordance with sub-section (2) has no provision about the settlement of disputes, such a dispute shall be settled by arbitration in accordance with the arbitration law of Nepal.
(5) Any dispute arising in connection with any foreign investment shall be settled by arbitration in accordance with the prevailing Rules or Procedures of the United Nations Commission on International Trade Law (UNCITRAL), unless otherwise agreed upon by the parties to the dispute.
(6) Arbitration to be conducted in accordance with this Section shall be held in Nepal, and substantive law of Nepal relating to arbitration shall apply.
Provided, that with respect to the case referred to in sub- section (2), the provision contained in that sub-section shall apply.
(7) If no agreement was made between the parties on the settlement of dispute prior to the arising of the dispute or if they realise that the agreement, if any made, is inadequate, the concerned parties may make an agreement for the settlement of a dispute even after the dispute has arisen. Information of the agreement so made shall be given to body registering the industry.
(8) Any dispute with respect to the agreement made in accordance with sub-section (7) may also be settled in accordance with this Section.
(2) Other provisions relating to the automatic route referred to in sub-section (1) and the online system shall be as prescribed.
(2) Notwithstanding anything contained in sub-section (1), such approval shall be deemed to be ipso facto ineffective in the following circumstance:
(a) In the event of failure, except for any reasonable reason, to commence bringing into Nepal of the amount of such foreign investment within two years after the date of the approval of foreign investment,
(b) In the event of transfer of cent percent ownership of an industry with foreign investment to a Nepali investor as a result of the sale of shares in the industry registered with the approval of foreign investment,
(c) In the event of the revocation of its registration as a result of a default on the part of the industry having got approval for foreign investment or the company establishing such an industry.
(3) Other provisions relating to the validity period of the approval of foreign investment shall be as prescribed.
(2) Other provisions relating to production upon making contract shall be as prescribed.
(2) In order to perform the act in accordance with a power of attorney given in accordance with sub-section (1), such a power of attorney shall be notarized and provided to the foreign investment approving body. The foreign investment approving body may, if it so considers necessary, look at the original of such a power of attorney.
(3) A person who is authorised in accordance with sub-section (1) may not delegate the authority conferred on him or her to another person.
(4) The person who gives a power of attorney may, at any time, withdraw the power of attorney given by him or her. The power of attorney shall become invalid from the date on which the person giving such power of attorney registers the information of such withdrawal of the power of attorney with the foreign investment approving body.
(5) Other provisions relating to the giving of power of attorney shall be as prescribed.
(2) The certificate of registration of industry with the Province and recommendation of the Provincial ministry looking after the matters of industry, among other things, shall be submitted in order to obtain the approval in accordance with sub-section (1).
(3) Other provisions relating to foreign investment in an industry registered in a Province shall be as prescribed.
(2) The acts and actions performed under the Foreign Investment and Technology Transfer Act, 1992(2049) shall be deemed to have been performed under this Act.
Industries or Businesses Restricted for Foreign Investment
Date of Authentication
2075/6/2 (18 September 2018)
Act Number 10 of the year 2075 (2018)
An Act Made to Provide for Amendment and Consolidation of Laws
Relating to Consumer Protection
Preamble:
Whereas, it is expedient to make amendment to and consolidation of the legal provisions relating to consumer protection in order to protect and promote constitutional rights of the consumers to obtain quality goods and services, to provide judicial remedy for the enforcement of the rights obtained by the consumers, and provide compensation for harm and injury likely to be caused to the consumers;
Now, therefore, be it enacted by the Federal Parliament.
(2) This Act shall commence immediately.
(a) “Court” means the Consumer Court referred to in Section 41.
(b) “Unfair trade and business” means any activity referred to in Section 16.
(c) “Production” means the process of producing, preparing, refining, changing, mixing, packaging or repackaging, assembling or labeling, or any or all the processes to be adopted in this regard
(d) “Consumer” means a person or institution that consumes or uses any goods or services.
(e) “Consumer association” means the institution established under the prevailing law with the objective of protecting and promoting the rights and welfare of the consumers.
(f) “Central Monitoring Committee” means the Central Market Monitoring Committee referred to in Section 25.
(g) “Sub-standard goods” means consumer goods of any of the following conditions:
(1) Goods the quality of which falls short of the standards determined under Section 6 or in which the quantity of an essential ingredient has been lowered, or any other material has been mixed.
(2) Goods which are stale, rotten or stored or prepared in dirty or toxic conditions or in which any chemical, colour or flavour has been used, so that they become harmful to human health,
(3) Goods which are fully or partly made of any diseased or disease-generating animals or birds or harmful vegetation,
(4) Goods which are produced, transported, hoarded, stored or sold without meeting the standard prescribed,
(5) Goods which have no quality of consumable goods if it is prescribed, and as mentioned by the producer, if it is not prescribed,
(6) Goods the quality of which falls short of the minimum necessary standards or exceeds the maximum standards prescribed, if any, in this Act or in the rules framed under this Act.
(h) “Prescribed” or “as prescribed” means prescribed or as prescribed in the rules framed under this Act.
(i) “Inspection Officer” means the Inspection Officer appointed or designated pursuant to Section 32.
(j) “Council” means the Consumer Protection Council to be formed pursuant to sub-section (1) of Section 22.
(k) “Laboratory” means the body established with the objective of testing the purity, perfection or quality of the goods and recognized by the Government of Nepal.
(l) “Ministry” means the Ministry of Industry, Commerce and Supply of the Government of Nepal.
(m) “Label” means a tag, sign, picture or other descriptive thing written, printed, lithographed, signed, embossed, included or displayed in any other manner, in or on the goods or the container containing such goods.
(m) “Goods” means the substance which the consumers consume or use or the materials made of the mixture of goods which do not inflict harm and injury or any kind of side effect to health, and this term also includes the raw material, colour, fragrance or chemical to be used in the production of such goods.
(n) “Price of goods” means the price the price labeled at the time of production, maximum retail price (M.R.P.), the price fixed in the import declaration form or the price fixed at the source by the producer.
(o) “Seller” means the person, firm, company or institution that sells and distributes goods or services.
(p) “Department” means the Commerce, Supplies and Consumer Welfare Protection Department.
(q) “Service” means electricity, drinking water supply, telephone, information technology, health, education and consultation, transport, drainage, banking or other services of similar nature, and this term also includes legal, medical or engineering services.
(r) “Defective product” means any goods or services that do not contain such minimum safety measures due to any of the following as are reasonably expected by the general people while using any product:
(1) defective design, construction, refinement, mixture or installation,
(2) defective packaging, protection or storage,
(3) defective presentation,
(4) lack of sufficient measure or precaution to control the potential risk or hazard as per the nature of the produced goods or services,
(5) product which is different or pirated or imitated from the product produced by the manufacturing company possessing the intellectual property right.
(2) Without prejudice to the generality of sub-section (1), for the purpose of protecting the rights, interests and concern of the consumers, every consumer shall have the following rights:
(a) right of easy access to goods or services,
(b) right to choose quality goods or services at the fair competitive price,
(c) right to be informed of the price, quantity, purity, quality etc. of the goods or services,
(d) right to obtain information from the producer, importer or seller regarding the quantity, ingredient or percentage of the substances contained in the goods made of or produced with the mixture of two or more than two substances,
(e) right to be safe from the sale and distribution of the goods and services that inflict harm to the human body, life, health and property,
(f) right to get appropriate legal action taken against the unfair trade and business activities,
(g) right to obtain compensation against harm and injury caused with the use of goods or services,
(h) right to receive remedy or hearing from the competent authority or entity on the protection of the rights and interests of the consumers,
(i) right to get consumer education.
(2) The Ministry shall perform the following functions in conducting regulation pursuant to sub-section (1):
(a) to implement the policy relating to quality, price determination and supply system of goods or services,
(b) to prevent or control monopoly or unfair trade activities that cause or possibly cause adverse impact upon the rights and interests of the consumers, or to formulate and implement a plan of action in this regard,
(c) to maintain fair market by continuously analyzing and reviewing the condition of demand and supply of the goods or services used within the country,
(d) to make necessary provisions to prevent and control the price determined or increased in an undesired manner by the producer, seller or distributor of the goods or services,
(e) to facilitate the supply system through the institutions or private firms or companies having full or partial ownership of the Government of Nepal in order to ensure the supplies of the food and other goods for the consumers at a fair price and easy manner,
(f) to fix the maximum quantity of the storage of the goods in any special circumstance, or at any particular place, for the period prescribed,
(g) to receive foods from the producers at the prescribed price and sell them to the general people with determining certain quantity of such foods in case there is a shortage of any foods produced within Nepal,
(h) to make necessary provision to maintain uniformity in the price in general, by managing wholesale or retail business,
(i) to coordinate with the concerned agencies to prevent artificial shortage of any goods or services from occurring or to regularly distribute the goods in all places, for protecting the rights of the consumers and regulating the supply system,
(j) to regulate the sale and distribution system of goods, and control the act of creating scarcity or black-marketing in an inappropriate manner or the unfair business activities.
(3) The Government of Nepal may, in order to protect the rights of the consumers, regulate the supply system and control the price and quality of the goods and services, make necessary policy and institutional provisions from time to time.
(4) The provision referred to in sub-section (3) shall have to be implemented as prescribed.
(2) The Government of Nepal shall have to publish the notice of the matters of the standards or quality of any goods or service determined pursuant to sub-section (1) in the Nepal Gazette.
(2) The following matters shall have to be mentioned in the label pursuant to sub-section (1):
(a) Name, address of the producer and registration number of the industry,
(b) Mixture, ingredient of mixture, quantity and weight of the goods, in such goods as food, medicines and cosmetics,
(c) In the case of the goods of which quality has been determined, the quality of such goods,
(d) Mode of using the goods and side effect likely to occur due to the use of such goods,
(e) In the case of the goods supposed to be used within a certain deadline, such deadline,
(f) Retail price, batch number and date of manufacture of the goods,
(g) If it is electronic, hardware, electrical or machinery or goods to be in use for a long time, guarantee or warranty and guarantee or warranty date of such goods, and other necessary things in accordance with the law related to such goods,
(h) If any defect is seen in the condition referred to in clause (g), provision to make reimbursement or to repair until certain period,
(i) In the case of the goods that are inflammable, hazardous or likely to break down easily, details relating to precaution to be adopted for the safety of such goods,
(j) Maximum retail price to be incurred after including all types of taxes applicable for the goods,
(k) If any process is supposed to be fulfilled prior to using any goods, such process; and harm and injury likely to occur when it is used without fulfilling such process,
(l) Use of awareness-oriented message, picture or sign on the label of the materials of the types of causing harm upon human health,
(m) Other matters as prescribed.
(3) The matters to be specified in the label pursuant to sub-section (2) shall have to be written in the Nepali or English language by the producer in the case of the goods produced within Nepal and by the importer in the case of the goods imported, in the way which can be understood by common people.
(4) The goods on which label is not affixed pursuant to sub-section (3) shall not be allowed to be imported, sold and distributed in Nepal.
(5) Notwithstanding anything contained elsewhere in this Section, it shall not be necessary to specify the matters set forth in this Section, while selling consumable goods such as vegetables, fruits to be sold openly.
Provided that the label shall have to be affixed on the imported vegetables and fruits.
(a) to produce quality goods or services,
(b) to determine the label of the goods,
(c) to specify the matters referred to in Section 6 on the label,
(d) not to produce defective product,
(e) to collect and destroy the goods produced by him or her if it is informed that such goods remain in the market upon having been defectively produced,
(f) to provide reasonable compensation if any kind of damage is caused to the consumer due to the manufacture of goods and service,
(g) not to make wrong or misleading advertisement or publicity of the goods or services,
(h) to provide the consumer with information as to the quantity, ingredients or percentage of the substances contained in the goods made of or produced with the mixture of two or more than two substances.
(i) to fulfill such other conditions as prescribed by the law.
(2) If the liability pursuant to sub-section (1) is not fulfilled or any fault, deficiency and defect occurs in the process of production, construction, refinement, design, formula, preparation, import, packing, labeling, and harm and injury is caused to anyone’s body, life, property after using such goods or services, the producer of such goods or services shall be responsible for such harm and injury and shall have the liability to provide compensation for the same.
Provided that,
(a) it must be the actual producer of the goods or services, the use of which causes harm and injury,
(b) direct cause must be established that harm and injury is caused with the consumption or use of the goods or services as claimed for causing such harm and injury.
(a) to import without exceeding or making different from the cost price,
(b) to provide details of the goods relating to the imported goods when so demanded by the concerned agency or official,
(c) not to import the goods prohibited to be imported under the prevailing law,
(d) to fulfill such other liabilities as prescribed.
(2) Notwithstanding anything contained in sub-section (1), except for the provision made otherwise as per the quality or nature of any goods, the goods shall be forbidden to be imported which are not supposed to or cannot be used after six months from the date of being imported or which cannot be used after the expiry of such period.
(3) If anyone imports the goods without specifying the matters to be specified on the label, and if harm and injury is caused to anybody due to the use of such goods, the importer shall be responsible for such harm and injury and be liable to provide compensation for the same.
(a) to transport within the determined time period as per the nature of the goods to be imported,
(b) to prevent degradation in the quality of goods while transporting,
(c) to completely abide by the safety arrangement and the conditions to be abided by as prescribed, while transporting,
(d) to provide the details of the goods when the concerned agency or official so demands,
(e) to fulfill such other liabilities as prescribed.
(a) to exercise care as per the nature of the goods while hoarding such goods,
(b) to hoard upon adopting safety measures as prescribed so as to prevent degradation in the quality as per the type or nature of the goods, and not to do any act that may cause degradation in the quality of goods,
(c) not to change or replace the label or details specified by the producer,
(d) to provide the details of the goods related to the hoarding of the goods when the concerned agency or the official so demands,
(e) to adopt safety measures as prescribed,
(f) to fulfill other liabilities as prescribed.
(a) to sell the goods to the consumers without discrimination,
(b) to safely keep and safely sell the goods as per the type or nature by preventing degradation,
(c) to keep price list of the goods so that it is clearly seen and understood by general people,
(d) to provide storage or details of the goods remained with him or her when the concerned agency or official so demands,
(e) to abide by the provision of guarantee or warranty, if any, in the goods,
(f) to sell the goods to the customers on a first-come-first-served basis,
(g) to give the bill or receipt on selling the goods,
(h) to fulfill other liabilities as prescribed.
(a) to provide the consumer with the service without discrimination,
(b) to keep nature of the service to be provided and the list of the price to be paid by the consumers for such service received, at the place visible to everyone, so that it is clearly understood by the general people,
(c) to provide the details and documents related to the service to be provided when the concerned agency or official so demands,
(d) to provide the service to the customer on a first-come-first-served basis,
(e) to give the bill or receipt after receiving the amount for the service provided to the consumer,
(f) to fulfill such other liabilities as prescribed.
(2) While returning the goods pursuant to sub-section (1), the seller shall not be allowed to make deduction in the price or take any kind of additional charge.
(3) While returning the goods pursuant to sub-section (1), the bill or receipt given by the seller at the time of purchasing such goods shall have to be produced.
(4) Notwithstanding anything contained in sub-section (1), no goods may be returned or taken as replacement in the following circumstances:
(a) if the quality or quantity of such goods is altered by the purchaser after the purchase,
(b) in the case of the goods of such nature that they must be used within the certain deadline, such deadline has already expired,
(c) in the case of the goods of such nature as being rotten, overripe, such as milk, fruits, fish, meat, in case they are not consumed instantly,
(d) if the purchased goods are already used,
(e) if the seal is broken off in the case of sealed goods.
(5) Notwithstanding anything contained elsewhere in this Section, in the case of sealed goods, such goods may be returned within fifteen days, in the unbroken condition of the seal, or other similar goods equal to the same price may be taken instead of such goods.
(2) The bill or invoice shall have to be shown at the time when the concerned official so demands.
(2) For the purpose of sub-section (1), if any of the following activities is conducted, an unfair trade and business activity shall be deemed to have been taken place:
(a) selling or providing the goods or services by lying, concealing, hiding or misleading the actual quality, quantity, price, measurement, format or composition etc. of such goods or services,
(b) releasing false or misleading advertisement, or selling the goods by making misleading advertisement,
(c) doing any of the following acts through oral, written or visual means in the case of goods or services:
(1) selling sub-standard goods by showing standard, quality, quantity, class, composition, design as if having specialty or quality,
(2) selling re-produced or old goods showing or misrepresenting that they are new one,
(3) advertising or notifying and disseminating, in false and misleading manner, while selling the goods or services even when no benefit is obtained as declared,
(4) claiming, guaranteeing or selling any goods through consumption or use of such goods without factual ground.
(d) determining price in a manner to shift burden upon the consumer price on the ground different than the ground of actual cost of any goods or services, or fixing the price by including the cost of any contest, lottery, occasion, or selling at such price,
(e) determining price by including the price or cost of other goods to be obtained as donation, gift or without charge upon the price of any goods or service, or selling such goods or service at such price,
(f) producing, mixing up or supplying or transporting or hoarding or selling the goods so as to become less or more than the quality or standard in any goods or service, or to inflict harm and injury upon the consumer from the use of such goods or service,
(g) creating artificial shortage of, hoarding or selling, any goods,
(h) selling the goods by including the price of goods destroyed by defective product or the price of goods contracted in the course of business transaction in the cost price of other goods,
(i) producing or importing fake goods or selling such goods to displace any goods,
(j) refusing to issue bill or invoice of the sold goods or service, or not issuing bill or invoice, or demanding additional amount while issuing bill, invoice,
(k) using poison or any chemical so as to inflict harm and injury upon the consumer while using any goods, or selling the goods so used,
(l) selling the already expired goods by affixing new label on such goods which is not consumable or is not supposed to be used,
(m) importing, producing or selling sub-standard goods which cannot be used,
(n) providing service without specifying the price, quality of service, venue and time to provide service by a professional service provider,
(o) selling so as to become contrary to sub-section (1) of Section 17 in collusion with the producer, importer, carrier, hoarder or seller or such person and other person, organization and institution,
(p) selling or providing by setting up levels or series more than the business level prescribed while selling or providing any goods or services,
(q) selling without fulfilling the structure, measurement or standard if any, prescribed for selling or providing any goods or service.
(2) No one shall cause adverse impact on the demand, supply or price of any goods or service by doing any of the following acts, in association with any person, institution or anyone else:
(a) determining quota of the raw materials required for the manufacture of any goods, or reducing the production of any goods or doing any other such work,
(b) creating artificial shortage by hoarding any goods or service or by any other manner,
(c) selling the goods or service at the determined time or place only or doing other acts of similar nature.
(a) producing, selling or importing sub-standard goods knowingly,
(b) selling any goods or services by lying or deceiving that the goods or services are other goods or services and stating high standard goods for low standard goods or services,
(c) producing or selling the goods or service that cause adverse impact upon the health of consumer,
(d) affecting the price and supply system by creating shortage of the goods by accompanying with businesspersons or business groups in order to manufacture, import or sell various goods of the same nature,
(e) operating service by adopting a circle system, quota system, rotational system, trip system or token system, in cooperation with more than one business persons or business groups that provide any service of the same nature,
(f) making a provision requiring to purchase other goods too, while purchasing any goods.
(2) The maximum price of essential food and other goods or services shall also have to be fixed in the list pursuant to sub-section (1).
(3) While selling the goods or service pursuant to sub-section (1), the seller shall not sell, or cause to be sold, the same in a price higher than that referred to in sub-section (2).
(2) If it is an industry to produce the goods, the industry registration certificate, and in the case of business, business registration, license shall have to be displayed at the place of sale in a way visible to the general people.
(3) The Government of Nepal may, by a notification in the Nepal Gazette, establish a price information center as prescribed.
(4) The producer and wholesaler or retailer located in the district concerned shall have to provide the factory price and the wholesale or retail price respectively to the price information center established pursuant to sub-section (3).
(2) While preparing standards relating to price determination pursuant to sub-section (1), profit amount to be taken by the seller also shall have to be accepted as basis in such a way that production cost of the goods, transport expenses, custom, tax, charge paid by the importer pursuant to law shall not be more than the percentage fixed while selling.
(3) While preparing standards relating to the determination of price of any service, if the agency prescribed pursuant to sub-section (1) has assigned anybody or authority in accordance with the law regulating or managing the conduct and functions of the person who provides such a service, the standards shall have to be prepared as per the standards determined by such a body or authority.
(4) While preparing standards, in case the standards are not determined even after the body or authority is assigned pursuant to sub-section (3), such a body or authority shall have to be consulted with.
(5) While preparing standards relating to the determination of price pursuant to sub-section (1) or (3), the standards may be determined differently to make the maximum price, be taken for such goods or services provided, on the basis of the geographical region, nature of the services and particular place.
(2) The Council referred to in sub-section (1) shall consist of the following Chairperson and Members:
(a) Minister for Industry, Commerce and Supplies – Chairperson
(b) Secretary, Ministry of Industry, Commerce
and Supplies -Member
(c) Secretary, Ministry of Agriculture and
Livestock Development -Member
(d) Secretary, Ministry of Land Management,
Cooperative and Poverty Alleviation -Member
(e) Secretary, Ministry of Finance -Member
(f) Secretary, Ministry of Home Affairs -Member
(g) Secretary, Ministry of Law, Justice and
Parliamentary Affairs -Member
(h) Secretary, Ministry of Health and Population -Member
(i) Chairperson, Federation of Nepalese Chambers
of Commerce and Industry -Member
(j) Chairperson, Nepal Chamber of Commerce -Member
(k) Chairperson, Confederation of Nepal Industries -Member
(l) Chairperson, Federation of Nepal National
Industries and Entrepreneurs -Member
(m) Two persons including one woman
nominated by the Ministry from among
the persons having experience of at least
five years in the body or institution related
to the rights and welfare of the consumers -Member
(n) Director General, the Department -Member-Secretary
(3) The term of the Members nominated pursuant to clause (m) of sub-section (2) shall be of two years, and they may be nominated again for another term.
(4) Notwithstanding anything contained in sub-section (3), the Ministry may remove such a Member from the post at any time if any act is done contrary to the rights and interests of the consumers or act is done in such a way that it becomes contrary to the functions, duties and powers of the Council.
(5) Before removing from the post pursuant to sub-section (4), he or she shall have to be given a reasonable opportunity to submit clarification.
(6) The Chairperson and Members of the Council shall be entitled to the meeting allowance facility as prescribed by the Government of Nepal.
(2) The meeting of the Council shall be convened at least twice a year, and the interval between the two meetings shall not be more than six months.
(3) If more than fifty percent members of the total members of the Council are present, it shall be deemed to constitute a quorum for the meeting of the Council.
(4) The Chairperson of the Council shall preside over the meeting, and in his or her absence, the Member selected from among the Members shall preside over the meeting.
(5) Experts and scientists of different sectors, communities may be invited to the meeting as necessary.
(6) The decision of the Council shall be authenticated by the Member-Secretary of the Council.
(7) Other procedures relating to the meeting of the Council shall be as determined by the Council itself.
(8) The Department shall perform the functions as the Secretariat of the Council.
(a) to submit to the Government of Nepal by determining policies on the matters regarding the protection and enforcement of the rights of the consumers, supply system and the determination of price and quality of goods and services,
(b) to provide necessary recommendation to the Government of Nepal regarding the amendment, improvement in the existing policies or new policies which are to be made regarding the protection of the rights of consumers,
(c) to disseminate and cause to be disseminated information relating to the rights and welfare of the consumers to get the consumers informed regarding the goods and services,
(d) to inform or get the consumers informed regarding the price, quality, quantity, purity and unfair trade activities of the goods or services,
(e) to make necessary policy arrangements for including the consumer education in the curriculum from secondary level up to the university level,
(f) to draft necessary policies to cooperate with national and international organizations or institutions related to the rights of consumers,
(g) to give directive to the Provincial Government or Local Level to protect and promote the rights of the consumers as necessary,
(h) to perform such other functions as prescribed.
(2) The Central Market Monitoring Committee referred to in sub-section (1) shall consist of the following Members:
(a) Secretary, Ministry of Industry, Commerce
and Supplies -Coordinator
(b) Joint-secretary, Ministry of Industry,
Commerce and Supplies (responsible
the supplies) -Member
(c) Joint-secretary, Ministry of Home Affairs -Member
(d) Secretary, Ministry of Agriculture and
Livestock Development -Member
(e) Secretary, Ministry of Land Management,
Cooperative and Poverty Alleviation -Member
(f) Director General, Department of Food
Technology and Quality Control -Member
(g) Director General, Nepal Bureau of Standards -Member
(h) Director General, Department of Drug
Management -Member
(i) Director General, Department -Member-Secretary
(3) The procedures relating to the meeting of the Central Market Monitoring Committee shall be as prescribed.
(a) to take necessary initiative to make the goods or services easily available, by identifying their shortage seen in the market,
(b) to monitor and supervise regarding the supply system, price, weight, quality, purity etc. of the goods or services in the market,
(c) to make recommendation of the procedures of operation of market monitoring, monitoring team and consumers organizations and institutions,
(d) to maintain coordination in the functions of the Market Monitoring Team and Local Monitoring Committee,
(e) to give necessary directives to the bodies that protect the rights and interests of the consumers and law enforcement bodies in order to make market monitoring effective,
(f) to set up the Consumers Information Center,
(g) to form committees or sub-committees as necessary,
(h) to perform such other functions as prescribed.
(2) The Provincial Market Monitoring Committee referred to in sub-section (1) may form monitoring teams or sub-committees as necessary.
(3) The functions, duties and powers of the Provincial Market Monitoring Committee referred to in sub-section (1) shall be as prescribed.
(4) Other provisions relating to the functions of the Provincial Market Monitoring Committee referred to in sub-section (1) shall be in accordance with the rules framed by the Provincial Government.
(2) The Committee referred to in sub-section (1) shall also consist of the bodies and consumers under the Local Level in necessary numbers.
(3) The functions, duties, powers, work procedures and other necessary matters of Local Market Monitoring Committee to be formed pursuant to sub-section (1) shall be as prescribed.
(4) The Local Market Monitoring Committee to be formed pursuant to sub-section (1) may form market monitoring teams or sub-committees as necessary.
(2) The Market Monitoring Team referred to in sub-section (1) may get information about or enquire into the quality, quantity, price determination of any goods or services.
(3) The Market Monitoring Team referred to in sub-section (1) may, while getting information or making inquiry pursuant to sub-section (2), demand necessary document and evidence, and it shall be the duty of the producer or seller concerned to submit such document or evidence.
(4) The Market Monitoring Team referred to in sub-section (1) may exercise all the powers conferred to the Inspection Officer under this Act.
(5) The Market Monitoring Team referred to in sub-section (1) shall, while making monitoring and inspection of the market, use the market monitoring and inspection form as prescribed.
(2) Inspection or monitoring shall be carried out accordingly if the prevailing law provides for monitoring and inspection, with respect to the inspection or inquiry pursuant to sub-section (1), and in other circumstances, the Ministry may form immediately an inspection or inquiry committee or designate any committee formed under this Act or the Inspection Officer to that effect.
(3) Any producer, dealer, agent, seller, person or institution found guilty from the inquiry or inspection pursuant to sub-section (1) shall be liable to action under this Act or the prevailing law.
(4) If upon inspection or inquiry, the committee or the Inspection Officer designated pursuant to sub-section (2) does not find that such an act falls under this Act, the committee or the officer shall send the matter, along with the inquiry or inspection file, to the concerned body for necessary action; and such a body shall also give information about the action taken in that respect to such a committee or officer.
(2) Other provisions relating to casual inspection shall be as prescribed.
(2) The qualification of the Inspection Officer appointed or designated pursuant to sub-section (1) shall be as prescribed.
(2) In the course of inspection, inquiry or search pursuant to sub-section (1), necessary description, information or statement may be taken from the producer, importer, carrier, hoarder, seller, service provider or other related person.
(3) While carrying out inspection, investigation or search pursuant to sub-section (2), if it seems unsafe, affected goods or goods having no quality are being produced or sold and distributed, or service provided or activities are contrary to this Act and the rules framed under this Act, the Inspection Officer may impose restriction on producing or selling and distribution of such goods or providing services for prescribed period by taking samples of such goods as prescribed.
(4) A testing list of the goods or services shall have to be prepared as prescribed for the purpose of carrying out market inspection or inquiry pursuant to sub-section (1).
(5) If it is not found to be in accordance with the testing list pursuant to sub-section (4), the Inspection Officer may immediately impose the fine referred to in Section 39 with restriction on the sale and distribution of such goods.
(6) The report relating to the functions carried out by the Inspection Officer pursuant to sub-section (2) shall have to be submitted to the Department within seven days.
(7) If a fine is imposed pursuant to sub-section (5) in the report pursuant to Sub-section (6), report shall have to be prepared by specifying such details as well.
(8) If it seems appropriate to give any order immediately to the producer or seller in course of inspection or inquiry, the Inspection Officer may give such an order or do such other act as appropriate.
(9) The procedures to be adopted by the Inspection Officer while carrying out inspection, inquiry or search shall be as prescribed.
(10) The Inspection Officer may, while carrying out inspection, inquiry or search, if it seems that any legal action is required to be taken against any producer, seller, send it to the Department by mentioning such details in the report as well, or to other bodies concerned with the reason if needed.
(11) The provisions relating to other functions, duties and powers of the Inspection Officer and the implementation of the report furnished by the Inspection Officer shall be as prescribed.
(2) The Inspection Officer shall, while forwarding samples to the laboratory pursuant to sub-section (1), have to forward them by giving symbol numbers to them.
(3) If a false result is given or negligence is found to have been made while testing the goods in the laboratory pursuant to sub-section (1), departmental action shall be taken against such an employee.
(2) When the goods are confiscated and destroyed pursuant to sub-section (1), the producer, importer or seller shall have to bear the expenses for confiscating or destroying such goods.
(2) If the person who makes a complaint pursuant to sub-section (1) wishes to keep his or her name confidential, the name of such a person shall have to be kept confidential.
(3) Other provisions relating to the complaint shall be as prescribed.
(2) If information is leaked by a consumers’ organization or institution of consumers or other person involved in the act referred to in sub-section (1), the Director General of the Department shall impose a fine on such person, representative or institution in accordance with the claimed amount as revealed and from fifty thousand rupees up to one hundred thousand rupees if the claimed amount in not set out, and such an organization or institution shall be included in the black list for a period not exceeding three years.
(a) failure to make the labeling pursuant to Section 6 or mentioning false matters in the label,
(b) failure of the producer, importer, carrier, hoarder, seller or service provider to fulfill his or her liabilities or doing any act to breach such liabilities under Sections 7, 8, 9, 10, 11 and 12 respectively,
(c) failure of the seller to withdraw the goods within the deadline prescribed or failure to give the goods equal to such price as replacement pursuant to Section 14,
(d) failure to keep the bills, invoices pursuant to Section 15,
(e) doing, or causing to be done, the unfair trade activity pursuant to clause (a), (g), (j) or (l) of sub-section (2) of Section 16,
(f) doing, or causing to be done, the unfair trade activity pursuant to clauses (b), (c), (d), (e), (f), (h), (i), (k), (m), (o) and (p) of sub-section (2) of Section 16,
(g) inflicting, or causing to be inflicted, adverse impact on demand, supplies or price pursuant to clause (a) of sub-section (1) or sub-section (2) of Section 17,
(h) doing, or causing to be done, any act referred to in clause (b) or (c) of sub-section (2) of Section 17,
(i) doing, or causing to be done, any act contrary to Section 18,
(j) selling, or causing to be sold, at the price higher than that fixed by the Government of Nepal, contrary to sub-section (3) of Section 19,
(k) failure to do, or causing not to be done, any act referred to in sub-section (1) or (2) of Section 20,
(l) to sell or distribute goods or services contrary to the standards determined under sub-section (1) of Section 21,
(m) not to render assistance in the course of investigation, inspection or monitoring under this Act pursuant to sub-section (2) of Section 54.
(a) From five thousand to twenty thousand rupees if the offence referred to in clause (d) of Section 38 is committed, or caused to be committed,
(b) From two hundred thousand to three hundred thousand rupees if the offence referred to in clause (e) of Section 38 is committed, or caused to be committed,
(c) From fifty thousand rupees to one hundred thousand rupees if the offence referred to in clause (h) of Section 38 is committed or caused to be committed,
(d) From fifty thousand to one hundred thousand rupees if the offence referred to in clause (k) of Section 38 is committed, or caused to be committed,
(e) Up to twenty thousand rupees if the offence referred to in clause (m) of Section 38 is committed, or caused to be committed.
(2) If the offence referred to in sub-section (1) is committed frequently, double fine shall be imposed for commission of the offence each time.
(3) The Inspection Officer shall have to inform the Department within three days by revealing all the details including the cause to impose the fine instantly and the amount charged thereof.
(4) The Inspection Officer may take the following actions against the producer, carrier, hoarder, importer or seller of such goods who does not pay or submit such fine within seven days from the date of the decision made to fine instantly pursuant to sub-section (1):
(a) keeping such goods sealed until the fine is paid,
(b) withholding such other goods as well as to be produced, transported, hoarded, imported or sold by the producer, carrier, hoarder, importer or seller of such goods until the fine is paid.
(5) If one is not satisfied with any act of the Inspection Officer under this Section, an application may be made to the Director General of the Department within seven days for the review of the matter.
(6) The Director General of the Department shall have to make a decision in this regard within twenty-one days after examining whatever or whoever is to be examined upon the application made against the decision by the Inspection Officer pursuant to sub-section (5).
(7) While making an application for the review, fifty percent of the fine imposed by the Inspection Officer shall have to be submitted as a cash deposit.
(8) The decision made by the Director General upon the application made for the review shall be final.
(9) Other procedures to be adopted regarding the instant imposition of fine by the Inspection Officer shall be as prescribed.
(a) with imprisonment from three months to six months or fine up to fifty thousand rupees or both penalties if the offence referred to in clauses (a) and (c) of Section 38 is committed, or caused to be committed,
(b) with imprisonment from three months to one year or fine from one hundred thousand rupees to three hundred thousand rupees or both penalties if the offence referred to in clause (i) of Section 38 is committed,
(c) with imprisonment from three months to six months or fine from fifty thousand rupees to one hundred thousand rupees or both penalties if the offence referred to in clauses (j) and (l) of Section 38 is committed.
(2) A party who is not satisfied with the decision made by the Director General of the Department under sub-section (1) may appeal to the concerned District Court within thirty-five days.
(3) For the following offences, punishment shall be as follows:
(a) with imprisonment from two years to three years or fine from three hundred thousand to five hundred thousand rupees or both penalties for one who commits, or causes to be committed, the offence referred to in clause (b) of Section 38,
(b) with imprisonment from two years to five years or fine from four hundred thousand to six hundred thousand rupees or both penalties for one who commits, or causes to be committed, the offence referred to in clause (f) of Section 38,
(c) with imprisonment from two years to three years or fine from three hundred thousand to five hundred thousand rupees or both penalties for one who commits, or causes to be committed, the offence referred to in clause (g) of Section 38.
(4) A person who commits, or causes to be committed, any other act contrary to this Act or the rules framed under this Act, Except for the acts under sub-section (1), shall be punished with imprisonment for a term not exceeding two years or fine up to three hundred thousand rupees or both.
(2) The venue and jurisdiction of the Consumer Court to be formed pursuant to sub-section (1) shall be as prescribed in the same notice.
(3) The Consumer Court shall consist of the Chairperson and Members as follows:
(a) District Judge of the concerned district
designated by the Government of Nepal -Chairperson
(b) Gazetted second class officer of Nepal Judicial
Service designated by the Government of Nepal -Member
(c) Gazetted second class officer of the Government
of Nepal designated by the Government of Nepal -Member
(4) The Government of Nepal shall notify the designation of the Chairperson or Members pursuant to sub-section (3) in the Nepal Gazette.
(5) The Government of Nepal shall consult the Judicial Council before the District Judge is designated as the Chairperson of the Court, and of the Judicial Service Commission before the officer of the Nepal Judicial Service is designated as a Member pursuant to sub-section (3).
Provided that the Bench in which at least one Member is present may carry out procedural matters other than detention, and the Bench in which two Members are present may take all other matters including detention.
(2) If unanimity is not reached while trying and settling a case in presence of two Members, the case shall be settled as per the opinion of the Chairperson if it is the Bench including the Chairperson in case it is the procedural matter of the case.
(3) If it is the Bench in which the Chairperson is not present, it shall be as per the opinion of the senior member based on the appointment. If it is the decision or final order of the case, it shall be submitted to the Chairperson, and the opinion supported by him or her shall be deemed to be the decision of the Court.
(4) The three Members shall collectively exercise the jurisdiction of the Bench and majority opinion including that of the Chairperson shall be deemed to be the decision of the Court.
(5) If all three Members have divergent opinion, the opinion of the Chairperson prevails on the procedural matters and if it is on decision or final order it shall be forwarded to the concerned High Court for the decision, by specifying the reasons for not being able to issue a decision or final order.
(6) Hearing of the case pursuant to sub-section (5) shall be held in the single Bench of the High Court and the decision or final order made by such a Bench shall be deemed to be the decision or final order of the Court.
(2) Notwithstanding anything contained in sub-section (1), if the person accused of contempt of court apologizes to the satisfaction of the Court, the Court may not initiate the proceedings or excuse, reduce or change in punishment if the punishment has already been determined or issue an order with effect of non-execution of the sentence, if the conditions are complied with by the accused.
(2) If it is obstructed to try, hear or settle the case, or if harassment or harm or injury is caused to any party due to the reason that any person, institution or office has not complied with the order pursuant to sub-section (1), the Court or Director General of the Department may impose upon such a person or institution or chief of office a fine not exceeding one thousand rupees each time.
(3) Notwithstanding anything contained in sub-section (2), if such a person or institution or chief of office makes an application to the Court or the Director General of the Department, within the time-limit determined by the Court or the Director General, specifying the reason for not being able to abide by such order, stating that fine should not be imposed, and if the statement of such application is found to be reasonable, the Court or the Director General of the Department may revoke such an order for imposition of the fine.
(2) If the Court is dissolved pursuant to sub-section (1), the cases, complaints or petitions remained pending at the time of dissolution after being filed in such Court shall be ipso facto transferred to the concerned District Court having territorial jurisdiction.
(a) physical or mental suffering or pain caused to the victim, and its severity,
(b) estimated expenses to be made for treatment if curable damage is caused,
(c) depreciation caused in the capacity of the victim to generate income due to the physical or mental
damage,
(d) victim’s age and his or her family responsibility, if incurable type of physical or mental damage is caused,
(e) number of victim’s family members who are dependent upon him or her and minimum expenses required for the maintenance of their livelihood if the victim has died,
(f) such other matters, out of the matters claimed by the victims, as found to be proper and appropriate,
(g) financial and business condition of the producer, importer, hoarder, seller and service provider.
(2) Other provisions relating to the determination of compensation pursuant to sub-section (1) shall be as prescribed.
(2) In the course of carrying out inquiry, monitoring or inspection under this Act, it shall be the duty of all the concerned to extend necessary support to the official carrying out such inquiry, monitoring or inspection or to the person, team or Inspection Officer deputed under this Act.
(2) Notwithstanding anything contained in sub-section (1), such a person shall not have to bear the liability regarding the offence occurred before he or she became the chief administrative official.
(2) Notwithstanding anything contained in sub-section (1), no employee of the Government of Nepal or corporate institution or the family member or representative of the consumers’ organization or institution or employee deputed for monitoring or their family member shall be entitled to the reward referred to in this Section.
(3) The name, address of the informant pursuant to this Section and the details of the information received from him or her shall be kept confidential.
(2) The Inspection Officer shall, after completing the investigation, have to forward the matter to the concerned government attorney for the decision on whether or not to institute the case, and if decision is made by the government attorney to institute the case, the Inspection Officer shall file the case.
(3) While filing the case pursuant to sub-section (1), the Inspection Officer shall file the case before the Director General of the Department in connection with the case relating to the offence carrying the punishment referred to in sub-section (1) of Section 40, and before the Court if the Court has been constituted and before the District Court concerned if the Court has not been constituted in connection with the case carrying punishment referred to in sub-section (3) of Section 40.
(2) Notwithstanding anything contained in sub-section (1), general procedures shall have to be followed in the cases carrying the sentence of imprisonment for more than three years.
(2) The Provincial Government may frame necessary rules in order to make the activities relating to market monitoring systematic and effective pursuant to Section 27.
(2) The concerned Rural Municipality or Municipality may, in order to make the activities relating to market monitoring systematic and effective pursuant to Section 28, frame and enforce necessary directives and procedures.
(2) The acts and actions performed under the Act pursuant to sub-section (1) shall be deemed to have been performed under this Act.
Date of Authentication
2073/01/10 BS (April 23, 2017 AD)
Act No. 1 of the year 2074
An Act Made to Provide for the Amendments to, and Consolidation of the Laws Relating to Banks and Financial Institutions
Preamble: Whereas, it is expedient to amend and consolidate forth with the prevailing laws relating to banks and financial institutions in order to enhance the confidence of the general public towards the overall banking and financial system of the country; to protect and promote the rights and interests of depositors; to provide quality and reliable banking and financial services to the general public through healthy competition among banks and financial institutions thereby making national economy strong and strengthened; and to maintain financial stability and make the necessary legal provisions concerning to incorporation operation, management, regulation, inspection and supervision of banks and financial institutions timely;
Now, therefore, be this Act enacted by the Legislature-Parliament as referred to in Clause (1) of Article 296 of the Constitution of Nepal
1. Short Title, Extension and Commencement: (1) This Act may be called as “Banks and Financial Institutions Act, 2073 (2017).”
(2) This Act shall extend to the whole territory of the state of Nepal and also enforce to a branch or liaison office opened outside of Nepal by a bank and financial institution incorporated in Nepal.
(3) This Act shall come into force at once.
2. Definitions: In this Act, unless the subject or the context otherwise requires, –
(a) “Court” means a Commercial Bench of the Court designated by the Government of Nepal with the approval of the Supreme Court by a notification published in the Nepal Gazette.
(b) “Chairperson” means and includes the Chairperson of the Board of Directors and the Executive Chairperson.
(c) “License” means a license issued by the Rastra Bank in the name of a bank or financial institution to carry out banking and financial transactions, pursuant to this Act.
(d) “Licensed transaction” means banking and financial transactions to be carried out by a bank or financial institution by obtaining a license under this Act.
(e) “Licensed Institution” means a bank or financial institution which has obtained a license pursuant to this Act for carrying out banking or financial transaction.
(f) “Significant Ownership” means a situation where any person has, solely or jointly in association with any other individual or institution, subscribed two percent or more shares of a bank or financial institution and due to share ownership one may have influence on the management of the bank or financial institution.
(g) “Borrower” means an individual, a firm, company or institution obtained credit from bank or financial institution.
(h) “Credit” means, and includes any amount lent by a bank or financial institution to any individual, firm, company, institution or other business enterprise subject to the repayment of there on principal, interest or other charge within the certain time limit, direct or indirect gurantee, interest or other charge of the credit, re-finance, restructuring and renewal of the credit, guarantee given and other commitment made for the repayment of such credit and also any type of credit as specified by the Rastra Bank by publishing a public notice.
(i) “Chief Executive” means, and includes the Chief Executive Officer having responsibility of operating a bank or financial institution and also the Executive Chairperson and Managing Director acting as the Chief Executive.
(j) “Office” means, the registered and central office of a bank or financial institution and also includes any branch office of a bank or financial institution located
within Nepal and outside Nepal and a branch office of a foreign bank or financial institution located in Nepal.
(k) “Net worth” means any amount that remains after deducting the external liabilities from the grand total of the assets to be maintained in the balance-sheet of a bank or financial institution.
(l) “Non-executive Director” means a Director excluding the Executive Director performing daily business of a bank or financial institution.
(m) “Current account” means an account of funds deposited with a bank or financial institution by a costumer that may be withdrawn at any time on demand.
(n) “Paid-up Capital” means the portion of the capital paid up on behalf of shareholders out of the issued capital of a bank or financial institution.
(o) “Risk-weight asset” means the total assets calculated by multiplying the amounts coming under each heading of on-balance sheet and off-balance sheet operations of a bank or financial institution by the risk-weight in the format as prescribed by the Rastra Bank.
(p) “Liquid assets” means the cash balance of a bank or financial institution, the balance remained in the current account, the balance maintained in the Rastra Bank and such assets of a bank or financial institution specified as liquid assets by the Rastra Bank from time to time.
(q) “Prescribed” or “as prescribed” means prescribed or as prescribed in the Rules or Byelaws framed under this Act.
(r) “Securities” means and includes a share, stock, bond, debenture, debenture stock or a mutual investment scheme certificate issued by a bank, financial institution or corporate body or a certificate, saving bond or bond issued by the Government of Nepal or by a corporate body against the guarantee of the Government of Nepal, and also other stock specified by the Securities Board as the stock to be transacted or transferrable through the stock market to sell or exchange such stock.
(s) “Articles of Association” means the Articles of Association of a bank or financial institution framed pursuant to the prevailing laws relating to companies.
(t) “Deposits” means and includes amounts deposited in current, savings or fixed accounts of a bank or financial institution through costumers with or without
accruing interests and also such amounts which a bank or financial institution accepts through different financial instruments as specified by the Rastra Bank from time to time.
(u) “Deposit Guarantee” means the act of security of deposit and guarantee of such deposit pursuant to Section 108.
(v) “Office bearer” means a Director, Chief Executive, Company Secretary and an officer level employee of a bank or financial institution who is authorized to make a decision on any matter.
(w) “Family” means a Director’s husband or wife, son, daughter-in-law, daughter, adopted sun, adopted daughter, father, mother, stepmother and also the elder brother, elder sister-in-law, younger brother, younger sister-in-law, elder sister and younger sister of the Director, who are dependent on him or her:
Provided that the term does not include members of the family being separated after the partition of the family property and carrying out his/her profession or business on his/her own.
(x) “Capital” means the authorized capital, issued capital and paid up capital of a bank or financial institution.
(y) “Capital Fund” means and includes the total sum of primary capital and supplementary capital of a bank or financial institution as specified by the Rastra Bank and also any other fund or amount as specified by the Rastra Bank from time to time.
(z) “Infrastructure Development Bank” means the Infrastructure Development Bank incorporated to carry out financial transactions as referred to in sub-section (5) of section 49.
(aa) “Letter of credit” means a letter written by one bank or financial institution in the name of any other bank or financial institution authorizing the latter thereon to accept cheques, drafts, or bills of exchange of any specified person within the limit of the amount specified therein.
(bb) “Memorandum of Association” means the Memorandum of Association of a bank or financial institution framed pursuant to the prevailing companies’ law.
(cc) “Primary Capital” means and includes the funds of a bank or financial institution listed under such headings as the paid-up capital, share premium, non-redeemable preference shares, general reserve fund and accumulated profit and loss, and also such other funds listed under other headings as may be prescribed as primary capital by the Rastra Bank from time to time.
(dd) “Acquiring Institution” means the holding bank or financial institution acquiring an institution licensed pursuant to this Act.
(ee) “Acquisition” means the act of acquisition by a licensed institution to another licensed institution having settled the accounts of entire assets and potential liabilities by winding up the legal capacity of such institution and also the act of accepting all contractual liabilities by the acquiring bank or financial institution created by the targeted institution before its merger.
(ff) “Savings Account” means accounts containing details of the amounts deposited by any customer for savings in a bank or financial institution.
(gg) “Bank” means and includes corporate body incorporated to carry out banking and financial transactions as referred to in Sub-Section (1) of Section 49 and a branch office of a foreign bank located in Nepal, a branch office opened outside of Nepal by a bank incorporated in Nepal and an Infrastructure Development Bank to performing the functions as referred to the Section 49 and a branch office of the same bank.
(hh) “Banking and financial transaction” means the banking and financial transaction as referred in Section 49.
(ii) “Bonus share” means and includes share issued as an additional share to shareholders, by capitalizing the saving earned from the profits or the reserve fund of a bank or financial institution, and the increase of the paid up amount of a share by capitalizing the saving or other fund.
(jj) “Fixed Account” means a periodic account of funds deposited with a bank or financial institution for a specified term, during which normally the deposited amount cannot be withdrawn.
(kk) “Rastra Bank Act” means the Nepal Rastra Bank Act, 2058 (2002).
(ll) “Rastra Bank” means the Nepal Rastra Bank.
(mm) “Targeted Institution” means a bank or financial institution to be merged in an acquiring institution pursuant to this Act with entire assets and liabilities.
(nn) “Audit Committee” means the Audit Committee as referred to in section 60.
(oo) “Dividend” means cash dividend, interim dividend or bonus share to be given by a bank or financial institution according to this Act and the prevailing laws.
(pp) “Liquidator” means and includes a person appointed for carrying out the functions of liquidation of bank or financial institution according to an order of a court or a resolution adopted by a meeting of the creditors and as well as an office carrying out the function of a liquidator.
(qq) “Leasing” means an act of acquiring only the possessory right of a movable or immovable asset for a specified period of time by retaining the ownership thereof with the bank or financial institution in consideration of which a lessee is required to pay the rent within the schedule as per the agreement.
(rr) “Off-balance-sheet transaction” means and includes letters of credit, letters of guarantee, letters of acceptance, commitments, swaps, options and transaction in advance concerning foreign exchange having, the potential of bearing liabilities by a bank or financial institution and also transactions of the instruments as specified by the Rastra Bank, from time to time.
(ss) “Financial institution” means and includes a corporate body incorporated to carry out banking and financial transactions as referred to in to sub-sections (2), (3) or (4) of Section 49 and a branch office of a development bank, finance company, micro finance institution or a branch office of a foreign financial institution located in Nepal and also a branch office opened abroad by a financial institution incorporated in Nepal.
(tt) “Financial interests” means a situation where any Director, shareholder subscribing one percent or more shares or the Chief Executive or a family member of such a person or the individual, company, or corporate body having the authority to appoint a Director subscribes ten percent or more shares of a firm, company or corporate body separately or jointly, such a person or persons are deemed to have financial interests in the institution having ten percent or more shares, and also include the interests which the Rastra Bank specifies as having
financial interests depending upon the nature and circumstance of a financial transaction.
(vv) “Branch of a foreign bank or financial institution” means a branch of any bank or financial institution having obtained a license from the Rastra Bank in accordance with this Act to carry out banking and financial transactions having opened a branch office in Nepal.
(ww) “Electronic transaction” means and includes the business of accepting deposits, making payments and transferring funds through telephone, telex, computers or magnetic tapes or other electronic equipment of a similar nature and transactions to be carried out through terminal, automated teller machines and cash dispensing machines, as well as those to be carried out through charge cards, debit or credit cards.
(ww) “Prospectus” means the prospectus to be published by a bank or financial institution pursuant to Section 8.
(xx) “Branch Office” means any branch, sub-branch, unit, area, and representative or liaison office of a bank or financial institution within and outside Nepal and any office including a branch or representative office or liaison office or any other office of a foreign bank or financial institution in Nepal.
(yy) “Share” means the divided portion of the share capital of a bank or financial institution.
(zz) “Shareholder” means a person having ownership in a share of a bank or financial institution.
(aaa) “Director” means and includes a member of the Board of Directors and also the Chairperson of the Board of Directors as well as an Alternate Director.
(bbb) “Board of Directors” means the Board of Directors constituted pursuant Section 14.
(ccc) “Promoter” means a person who, having undertaken to subscribe at least one share, signs the Articles of Association and the Memorandum of Association in the capacity of a Promoter for the incorporation of a bank or financial institution pursuant to this Act.
(ddd) “Affiliated person” means a Director, office bearer of a bank or financial institution or his/her family member or any firm, company or institution having substantial ownership of such a person or any person, firm, company or institution having substantial ownership in such a firm, company or institution or also a beneficial owner with substantial ownership thereof.
(eee) “Independent Director” means the person appointed to the position of Independent Director pursuant to Sub-Section (3) of Section 14.
(fff) “Voluntary Liquidation” means a situation in which a bank or financial institution initiates voluntary liquidation pursuant to Chapter 11.
(ggg) “Creditor” means and includes a person or a body corporate to whom/which a bank or financial institution has to pay and also a depositor and debenture-holder for the purpose of liquidation process.
(hhh) “Hypothecation Loan” means a loan disbursed having entered into an agreement between a bank or financial institution and a Borrower against the collateral security of the stock having retained such stock under possession of the borrower concerned.
3. Incorporation of Banks or Financial Institutions: (1) Any person, wishing to incorporate a bank or financial institution to carry out financial transactions according to this Act shall incorporate it by getting such a bank or financial institution registered as a public limited company in accordance with the prevailing laws:
Provided that banks or financial institutions which are in operation at the commencement of this Act do not require to be incorporated pursuant to this sub-Section.
(2) An official authorized in accordance with the prevailing laws in force to register a company pursuant to Sub-Section (1) shall register the company subject to Section 4.
4. Prior-approval to be Obtained to Incorporate Banks or Financial Institutions: (1) A person or an institution desires to incorporate a bank or financial institution for the purpose of Section 3 shall, while making an application for getting such a bank or a
financial institution registered according to the prevailing laws, make an application to the Rastra Bank along with the prescribed fee for obtaining prior approval having enclosed therewith the following documents:-
(a) Memorandum of Association of the proposed bank or financial institution,
(b) Articles of Association of the proposed bank or financial institution,
(c) Feasibility study report of the proposed bank or financial institution,
(d) Personal details of the applicant in the form as prescribed by the Rastra Bank,
(e) A certified copy of the agreement, if any, concluded between the applicants prior to incorporation of the bank or financial institution in relation to incorporation of the bank or financial institution,
(f) Evidence of the statement disclosing the sources of incomes and of tax clearance by the applicants up to the fiscal year immediately preceding the making of the application pursuant to this Section,
(g) Details as to whether or not the applicant of the proposed bank or financial institution has become a bankrupt in Nepal or abroad, whether or not he/she has borrowed any loan from any bank or financial institution, whether or not the person has been blacklisted in any transaction with a bank or financial institution, if so, whether or not a period of three years has lapsed after having such a blacklisting,
(h) Self-declaration of the applicant stating that no action has been taken against and no punishment has been imposed on the applicant in Nepal or abroad for being involved in cheating, fraud or any criminal offence deemed to be as such as per the prevailing laws,
(i) Details as to whether or not any action has been taken against the applicant in Nepal or abroad by any regulatory or oversight authority or whether or not a license of the company or bank or financial institution in which he/she is associated with has been suspended, revoked or subjected to compulsory liquidation or is in the course of being so,
(j) Details as to the names, surnames, addresses and relationship of the family members of the applicant; substantial ownership and capacity of each of them and if any of them is a Director, official or employee in any institution, details as to the title of the post each of them holds:
Provided that in cases where a body, applicant is a corporate, details as to the person having substantial ownership or position in that body corporate body, the audited financial statements of the last three years as well as the tax clearance certificate of that corporate body shall also be enclosed.
(k) Written authority given to the Rastra Bank to allow it to conduct or to cause to conduct an inquiry as to the financial and professional background of the applicant and to share such notice and information,
(l) An undertaking that the deposits to the limits as prescribed by the Rastra Bank will be guaranteed,
(m) Other details or documents as specified by the Rastra Bank from time to time.
(2) The Rastra Bank may, if it finds appropriate to grant approval upon the examination of the application submitted for prior approval pursuant to Sub-Section (1) and enclosed documents, grant its approval to incorporate such a bank or financial institution within one hundred twenty days after filing of the application, with or without prescribing any conditions.
(3) Notwithstanding anything contained in Sub-Section (2), no prior approval shall be given to incorporate a bank or financial institution to the following persons and the firms or companies having substantial ownership of such persons and of the members of their family if they had been:
(a) Being investigated in regulatory actions of the Rastra Bank,
(b) Convicted of any banking offence,
(d) Convicted of cheating, fraud, forgery,
(e) Convicted of any offence of money laundering and terrorist financing activities,
(f) Convicted of any the offence of corruption,
(g) Convicted of any serious types of offences such as trafficking-in-person, kidnapping,
(h) Hostage, taking and rape.
5. Prior Approval to be Obtained for Incorporation of Bank or Financial Institution in Foreign Investment: (1) A foreign bank or financial institution shall, for the purpose of obtaining prior approval to incorporate a bank or financial institution as a subsidiary company in accordance with this Act in joint venture with a corporate body registered in Nepal or with a Nepali citizen or to maintain the share capital as specified by the Rastra Bank, shall submit in addition to the documents set forth in Sub-Section (1) of Section 4 the following documents and details along with the fee specified by the Rastra Bank:-
(a) The Memorandum of Association, Articles of Association of the foreign bank or financial institution and a copy of the certificate of incorporation of the bank or financial institution in the country concerned and capital structure thereof,
(b) A copy of the license of the foreign bank or financial institution obtained from the country concerned for carrying out banking and financial transactions,
(c) Details as to the principal place of business,
(d) A certified copy of the audited balance-sheet and profit and loss account of the last three years of the foreign bank or financial institution,
(e) Details as to the proposed business plan in Nepal, business strategies and types of transaction to be carried out, internal control, and risk management,
(f) Decision made by the foreign bank or financial institution as per the prevailing laws of the country concerned to open bank or financial institution in Nepal and the authority granted by the regulatory body of the country concerned.
(2) The Rastra Bank may, if it deems appropriate to grant approval upon examination of the application submitted for prior approval pursuant to Sub-Section (1) and enclosed documents, grant its approval to a foreign bank or financial institution for incorporation of the bank or financial institution in joint venture or within the prescribed share limit within one hundred twenty days after making of an application, with or without prescribing any conditions.
(3) A foreign bank or financial institution may, with approval from the Rastra Bank, take share ownership of a local bank or financial institution having been in operation, as a joint venture by completing the procedures as prescribed by the Rastra Bank.
(4) Notwithstanding anything contained elsewhere in this Act, investment made by any foreign bank or financial institution or other foreign institution by getting approval pursuant to the prevailing laws before the commencement of this Act shall be deemed to have been continued.
6. Approval to be Obtained to Open Branch Office of Bank or Financial Institution:(1) If any internationally rated foreign bank or financial institution wishes to open a branch office to carry out banking and financial transactions or non-banking financial transactions within Nepal, prior approval of the Rastra Bank shall be obtained before opening such a branch office.
(2) For the purpose of Sub-Section (1), an application shall be made to the Rastra Bank along with the capital and fees as prescribed by the Rastra Bank.
(3) While making an application pursuant to Sub-Section (2), such a foreign bank or financial institution shall submit the following details and documents in addition to the details and documents as referred to in Sub-Section (1) of Section 5:-
(a) Written commitment made by the Board of Directors that it will make available on demand of the Rastra Bank the amount necessary for fulfilling its entire liabilities with regard to the
business activities of its branch or representative or liaison office of the foreign bank or financial institution concerned in Nepal,
(b) Details as to the location of the proposed branch office of the foreign bank or financial institution,
(c) Details as to the possible office bearers in the proposed branch office of the foreign bank or financial institution.
(4) The Rastra Bank may, if it deems necessary to demand further documents or details while carrying out inquiry into the documents or details submitted pursuant to Sub-Section (3), demand the required documents or details from the concerned applicants.
(5) The Rastra Bank may, if it deems appropriate to grant prior approval while carrying out inquiry into additional documents submitted pursuant to Sub-Section (3) and of the documents asked for submission pursuant to Sub-Section (4), grant approval to open a branch office in Nepal within one hundred twenty days after filing of the application, with or without prescribing any conditions.
(6) The foreign bank or financial institution, after obtaining prior approval as referred to in Sub-Section (5), shall register a branch office according to the prevailing companies laws.
(7) The branch office of a foreign bank or financial institution registered pursuant to Sub-Section (6) shall make an application to the Rastra Bank along with the following documents and details as well as the charge or fee as prescribed by the Rastra Bank for approval to carry out banking and financial transactions in Nepal:-
(a) Registration certificate registered according to the prevailing laws to carry out baking and financial transactions in Nepal as a branch office,
(c) Letter of approval or consent granted by the Government or Central Bank or regulating agency according to the law of the country concerned of the foreign bank or financial institution to open a branch office of such bank or financial institution in Nepal,
(d) Details of the discrepancy, if any, in any matter to be completed by the foreign bank or financial institution concerned according to this
Act after the submission of the application before the Rastra Bank for the establishment of a branch office of the foreign bank or financial institution or after obtaining approval from the Rastra Bank,
(e) Other information and details as may be demanded by the Rastra Bank.
(8) The Rastra Bank may, if it deems appropriate upon carrying out inquiry into the application received pursuant to Sub-Section (7), grant approval to such a branch office of a foreign bank or financial institution for carrying out banking and financial transactions in Nepal, within ninety days from the date of filing the application.
(9) The Rastra Bank may, while granting approval pursuant to Sub-Section (8), prescribe the necessary terms and conditions.
(10) A bank or financial institution may open a branch office outside Nepal by obtaining approval from the Rastra Bank.
(11) The Rastra Bank may, from time to time, make policies as may be required with regard for opening branch office outside of Nepal pursuant to Sub-Section (10).
7. Power to Refuse to Grant Prior Approval: (1) The Rastra Bank may refuse to grant prior approval for the incorporation of any bank or financial institution and for opening a branch office of the foreign bank or financial institution in any of the following circumstances:
(a) If the name of or banking and financial transaction to be carried out by, the proposed bank or financial institution is not found to be appropriate from the point of view of public interest, religions, ethnicities or communities etc.,
(c) If the objectives of the proposed bank or financial institution are contrary to the laws in force,
(d) If incorporation of the proposed bank or financial institution does not seem to be technically appropriate,
(e) If a study of the feasibility study report, details and documents and other infrastructures submitted by the proposed bank or financial
institution does not provide a ground to believe that it may carry out financial transactions in a healthy and competitive manner,
(f) If all promoters of the proposed bank or financial institution have not signed the Memorandum of Association and Articles of Association, stating their names, addresses and number of shares subscribed by them, in the presence of a witness and the name and address of the witnesses have not been mentioned,
(g) If per person share investment limit and share ownership ratio has not been found to have been maintained as specified by the Rastra Bank from time to time,
(h) If it is found to be contrary to the policy relating to incorporation of banks or financial institutions and licensing policy issued by the Rastra Bank,
(i) If any condition as prescribed by the Rastra Bank has not been found to be fulfilled.
(2) If the Rastra Bank refuses to grant prior approval to the proposed bank or financial institution for any of the reasons as referred to in Sub-Section (1), information shall be given to the applicant stating the reasons thereof.
8. Prospectus: (1) A bank or financial institution shall, before public offering of its securities, have to get the prospectus registered at the Rastra Bank after obtaining the necessary approval concerning securities according to the prevailing laws.
(2) Until and unless such prospectus is registered pursuant to Sub-Section (1), the said bank or financial institution or anyone on behalf of the bank or financial institution shall not be allowed to publish the prospectus of such a bank or financial institution.
(3) Notwithstanding anything contained in Sub-Section (1), until and unless the Rastra Bank receives a written notification of the approval from the Securities Board to register the prospectus, the Rastra Bank shall not register such prospectus.
9. Allotment of Shares: (1) The bank or financial institution shall set aside at least thirty percent share of its total issued capital for subscription by the general public.
Explanation: For the purpose of this section, “general public” means a natural person.
(2) The shares allotted to the general public pursuant to Sub-Section (1) shall be sold to the general public within the stipulated time. The shares that could not be sold in such a manner may be sold to any other firm, company or institution.
(3) The bank or financial institution may set aside 0.5% shares, except that of the limit referred to in Sub-Section (1), to its employees.
(4) The bank or financial institution may, if it wishes, convert the shares into ordinary shares having fulfilled the process specified by the Rastra Bank in such manner as not to be the share ownership of the promoter shares group less than 51 percent.
Explanation: For the purpose of this Chapter,-
(a) “Promoter shares group” means the promoter shares group as prescribed by the Rastra Bank.
(b) “Ordinary shares group” means the shares groups other than the promoter shares group.
(5) Notwithstanding anything contained in Sub-Section (1), the ratio of share ownership as set forth in Sub-Section (1) is not necessarily be there in the case of a bank or financial institution and infrastructure development bank to be incorporated under significant ownership of Government of Nepal.
(6) A bank or financial institution to be incorporated in joint venture with a foreign bank or financial institution or other foreign institution or infrastructure development bank shall allot the shares to the general public as specified by the Rastra Bank.
(7) While inviting applications from the general public for subscription of its shares, a bank or financial institution shall demand payment of hundred percent amount of the face value of its shares along with application.
10. Transactions of Securities: (1) A bank or financial institution shall, while issuing its securities for subscription to the general public, carry out the acts of sale, allotment and the act of exchange in accordance with the prevailing laws relating to securities.
(2) A bank or financial institution shall submit a copy of an agreement entered into by it on the transaction of securities through any institution dealing with securities before the Rastra Bank, within seven days from the date of the conclusion of such agreement.
(3) A bank or financial institution shall, while issuing any type of debenture or financial instrument, obtain prior approval of the Rastra Bank.
(4) The Rastra Bank may, while granting approval pursuant to Sub-Section (3), specify the terms and conditions as may be required and it shall be the duty of the bank concerned or financial institution to abide by such terms and conditions.
11. Provisions Relating to the Sale of Shares or Pledging of Securities: (1) A promoter of a bank or financial institution shall not be entitled to sell or pledge any share registered under his/her ownership for at least five years from the date of commencement of financial transactions.
(2) Notwithstanding anything contained in Sub-Section (1), in cases where a special circumstance arises due to emergence of any obstruction or hindrance in the operation of a bank or financial institution or a promoter shareholder is included on the blacklist owing to transactions with another bank or financial institution, shares may be sold or purchased amongst promoters by obtaining approval from the Rastra Bank.
Explanation: For the purpose of this Section, “special circumstance” means a situation where to hold a meeting of the Board of Directors has not been possible due to lack of a quorum for a consecutive period of three times or a situation where no decision been made possible because of disputes amongst its Directors.
(3) If a promoter wishes to sell or pledge the shares held in his/her name after five years from the date of commencement of financial transactions and after shares are issued to the general public by the bank or financial institution, he or she may sell or pledge such shares by obtaining approval from the Rastra Bank on the condition that such shares shall remain in the promoters’ group:
Provided that, approval of the Rastra Bank shall not be required while selling or pledging shares by a promoter having subscribed the shares of less than two percent of the paid up capital.
(4) Notwithstanding anything contained in Sub-Section (1) and Sub-Section (2) of Section 9, after completion of a period of ten years of transactions by a bank or financial institution, the promoter shares may, gradually be converted into ordinary shares with the approval of the Rastra Bank by giving due consideration to the impact it may have on the capital market, banking and the overall financial sector.
(5) In cases where any company or corporate body has subscribed promoter shares, prior approval of the Rastra Bank shall be obtained before alteration of shareholders or sale or transfer the ownership of shares among the shareholders having substantial ownership of such company or corporate body:
Provided that, approval of the Rastra Bank shall not be required while selling or transferring the shares by a company or corporate body having subscribed the shares of less than two percent of the paid up capital of a bank or financial institution.
12. Prohibition on Transaction of Securities: (1) The Director, Chief Executive, Auditor, Company Secretary of a bank or financial institution or a person directly involved in the management and account of a bank or financial institution shall not buy or sell, mortgage or cause to be mortgaged, cause to be bought or sold, accept or give in the form of a gift, transfer or transact the securities of the concerned bank or financial institution or of its subsidiary company in his/her name or in name of any member of his/her family or a firm, company or institution under the control of such person or to any other person until he/she holds such a position or until one year from the date of retirement from such position:
Provided that nothing in this Sub-Section shall prevent from buying and selling securities among Directors to Directors or Directors to Promoters with the approval of the Rastra Bank while issuing bonus shares, rights shares or the shares allotted for employees or issuing new shares, or while implementing a directive of the Rastra Bank or while selling the entire share having in any bank or financial institution under own ownership by any Director or any corporate body having power to appoint Director or while merging or amalgamating banks or financial institutions in each other according to the provisions made in Chapter-10 or while acquiring all assets or liabilities of one bank or financial institution by another bank or financial institution or while carrying out purchase or sale of securities among promoter directors or directors to directors with the
approval of the Rastra Bank in cases of emergence of any hurdle in the operation of the bank or financial institution or while carrying out purchase or sale or transfer of shares during the process of reformative or settlement process of a problematic bank.
(2) In cases where anyone commits any act in contravention of Sub-Section (1), the bank or financial institution concerned shall forfeit such securities and sell them according to the process as prescribed by the Rastra Bank.
13. Prohibition on buy back by Bank or Financial Institution of its’ Own Shares: (1) No bank or financial institution shall buy back its own shares or lend loans against security of its own shares.
(2) Notwithstanding anything contained in Sub-Section (1), a bank or financial institution may, with the approval of the Rastra Bank, buy back its shares out of its free reserves available for being distributed as dividends not exceeding the percentage prescribed by the Rastra Bank, under the following circumstances:
(a) If the shares issued by the bank or financial institution have alredy been fully paid up,
(b) If the shares issued by the bank or financial institution have already been listed in the securities market,
(c) If the buy-back of its own shares is authorized by the Articles of Association of the concerned bank or financial institution,
(d) If a special resolution has been passed at the General Meeting of the concerned bank or financial institution authorizing the buy-back of its own share,
(e) If the ratio of the debt owed by the bank or financial institution is not more than double of the capital and general reserve fund after such buy-back of shares,
Explanation: For the purposes of this Sub-Section, “debt” means all amounts of secured or unsecured debts borrowed by a bank or financial institution.
(f) If the value of the shares to be bought back by a bank or financial institution is not more than twenty percent of the total paid up
capital and general reserve fund of that bank or financial institution,
(g) If the buy-back of the shares comply with the directives relating to the capital fund issued by the Rastra Bank to that bank or financial institution,
(h) If it is not against the directives issued by the Rastra Bank from time to time with regard to buy back of shares.
(3) A bank or financial institution shall make an application to the Rastra Bank for the approval to buy-back its own share pursuant to Sub-Section (2) with the following details:-
(a) The reason, necessity, duration and modus-operandi for the buy-back of the shares,
(b) A statement of the evaluation of the potential impacts on the financial situation of the bank or financial institution as a result of the buy-back of the shares,
(c) The type of the share, par value of the share and number of the shares purposed to buy-back,
(d) The maximum or minimum amount required to buy-back the shares as referred to in Part (c), and the source of such amount,
(e) Such other matters as specified by the Rastra Bank with regard to the buy-back of its own shares,
(f) Other necessary matters to be mentioned as per the prevailing laws.
(4) The Rastra Bank may, in cases where, upon inquiry into the application received as per Sub-Section (3) and the details enclosed therewith, it deems appropriate to grant approval to such a bank or financial institution to buy back its own shares, grant such approval.
(5) Upon receipt of the approval pursuant to Sub-Section (4), the concerned bank or financial institution may buy back its shares in any of the following manners, within six months from the date of receipt of such approval or within twelve months of the adoption of a special resolution at the General Meeting, whichever is the later: –
(a) By purchasing through the securities market,
(b) By purchasing from the existing shareholders on a proportional basis.
(6) If a bank or financial institution buys back its own shares pursuant to Sub-Section (5), it shall file with the Rastra Bank a return containing the number of shares bought back, amount paid for the same and the other necessary details within thirty days of the date of such a buy-back.
(7) There shall be established a separate capital redemption reserve fund, to which a sum equal to the face value of the shares bought back pursuant to Sub-Section (5) shall be transferred; and the amount of such fund shall be maintained as if it is the paid-up capital.
(8) If a bank or financial institution buys back its own shares pursuant to Sub-Section (5), it shall cancel the shares so bought back within one hundred twenty days of the date of such a buy-back.
(9) Other provisions regarding buy-back of its own shares by a bank or financial institution shall be as prescribed by the Rastra Bank.
14. Constitution of Board of Directors: (1) A bank or financial institution shall have a Board of Directors comprising at least five Directors and not exceeding seven Directors.
(2) Subject to this Act and the Articles of Association, the General Meeting of a bank or financial institution shall appoint the Directors:
Provided that,-
(a) Until the First Annual General Meeting of the bank or financial institution is held, promoters shall appoint the Directors.
(b) In case where the position of any Director falls vacant before the holding of the Annual General Meeting, the Board of Directors may appoint a Director until the next General Meeting is held.
(c) In cases where any corporate body has subscribed shares, it may appoint Directors in proportion to the number of shares it has
subscribed and while nominating in such a manner, the same person shall not be nominated to more than one bank or financial institution.
(d) Notwithstanding anything contained in Clause (c), nothing shall prevent from appointing a person, who is a Director in any bank or financial institution as Director of an Infrastructure Development Bank.
(3) The Board of Directors shall appoint at least one independent Director from among the persons possessing qualifications and experience set forth in Section 17 and information thereof shall be furnished to the First General Meeting to be held after such an appointment:
Provided that no promoter, Director or shareholder possessing more than zero point one percent share of a bank and financial institution and his/her member of family may become an independent Director.
(4) Notwithstanding anything contained in Sub-Sections (1) and (3), no more than one member of a family may become a Director of any bank or financial institution at the same time.
(5) A Director chosen by the Directors from among themselves by a majority votes shall be the Chairperson of the Board of Directors.
(6) A company, corporate body, foreign bank or financial institution which has subscribed shares of a bank or financial institution may, while appointing a director in proportion to the shares it has subscribed, appoint an Alternate Director to work in the absence of the Director.
15. Term of Office of the Directors: (1) The term of office of a Director shall be for a maximum period of four years as provided for in the Articles of Association and he/she may be eligible to be reappointed or re-nominated:
Provided that an Independent Director may be appointed for only one term of office.
(2) Notwithstanding anything contained in Sub-Section (1), the Executive Chairperson or Managing Director appointed after the commencement of this Act shall remain in office only for two consecutive terms.
16. Qualifications of Director: (1) A person to be appointed to the office of Director shall have to possess the following qualifications:-
(a) Having work experience of at least five years as a Director or office bearer level of a foreign or local bank or financial institution or corporate body of the related sector or at the officer level of the Government of Nepal, or
(b) Having earned a bachelor degree and having work experience of at least three years as a Director or office bearer level of a foreign or local bank or financial institution or corporate body of the related sector or at least at the officer level of the Government of Nepal, or
(c) Having earned a master degree in the related subject as prescribed.
(2) Notwithstanding anything contained in Sub-Section (1), the academic qualifications and experience of a Director of a financial institution of class “D” will be as prescribed by the Rastra Bank from time to time:
Provided that the qualifications of an independent director shall be as set out in Section 17.
17. Qualifications of Independent Director: While appointing an Independent Director by a bank or financial institution, it shall do so from among the persons having met the following qualifications and experience:-
(a) In the case of a class “A” bank or national level class “B” development bank, having obtained at least master’s degree in a subject as prescribed by the Rastra Bank and experience as prescribed by the Rastra Bank,
(b) In the case of a class “B” development bank and a financial institution of class “C”, other than the class “B” development bank of the national level, having obtained at least bachelor’s degree in a subject prescribed by the Rastra Bank and work experience as prescribed by the Rastra Bank,
(c) In the case of a micro finance institution of class “D”, a person possessing the qualifications and experience prescribed by the Rastra Bank.
18. Disqualification of Directors: (1) The following persons shall not be eligible to become a Director of the a bank or financial institution:-
(a) If he or she has not attained the age of 25 years,
(b) If he or she is of unsound mind or insane,
(c) If he or she has been declared bankrupt in Nepal or abroad for being unable to pay debt,
(d) If he or she has been blacklisted or declared a defaulter in connection with any transaction with any bank or financial institution in Nepal or in abroad, and a period of at least three years has not been lapsed after removal of his\her name from the blacklist or list of defaulter,
(e) An incumbent Director or an employee of any corporate body carrying out transactions of a bank or financial institution or any institution collecting any type of deposits or carrying out transactions relating to insurance,
(f) A borrower or an incumbent auditor or an advisor of the concerned bank or financial institution or a person, firm or company who/which is a partner in any kind of contract with the concerned bank or financial institution or having personal interests,
(g) Who has acquired the membership of the Stock Exchange to act as a securities broker or a merchant banker,
(h) Incumbent Director of a licensed bank or financial institution,
(i) A person, who has not subscribed to the minimum number of shares required to subscribe to be eligible for appointment as a Director pursuant to the Articles of Association of a bank or financial institution,
(j) Incumbent employee of the Government of Nepal, or a corporate body having ownership of the Government of Nepal, or Rastra Bank or of a bank or financial institution,
Provided that nothing in this clause shall prevent from nominating a Director in a micro-finance institution or
infrastructure development bank, of which share has been purchased by the Government of Nepal or an institution having under the ownership of the Government of Nepal or Rastra Bank or bank or financial institution.
(k) Who, having a liability to pay taxs pursuant to the laws in force, has failed to pay the same
(l) If he or she has not completed a period of ten years after serving out the sentence upon being convicted of an offence of theft, cheating, forgery, fraud, corruption, any offence involving moral turpitude or a banking offence from a court of Nepal or that of a foreign country,
(m) If action had been taken against him or her by a regulatory agency as per the law for committing an act in contravention of the law and if he or she has not completed a period of five years after being taken such action,
(o) In the case of an independent Director, If he or she is a promoter or a shareholder holding ownership of more than 0.1 % share of the concerned bank or financial institution,
(p) If he or she has not served the full sentence or is yet to clear the dues of the fine imposed by a court of law or if he or she is in arrears to pay a government due.
(2) Notwithstanding anything contained in Clause (e) of Sub-Section (1), an official or employee of a bank or financial institution may work as a Director of a subsidiary company of the same bank or financial institution.
19. Ineligibility to Remain in Office of Director : (1) No person shall remain in the office of Director of a bank or financial institution in any of the following circumstances: –
(a) If he or she does not possess the qualifications as referred to in Sections 16 or 17 or is disqualified pursuant to Section 18,
(b) In cases where a motion to remove from the office of a Director is adopted by a majority of the General Meeting at the recommendation of the group from which he/she was appointed to
the office of Director that is passed by the shareholders having representation of at least fifty one percent of the shares of the same group,
Explanation: For the purpose of this Section, “group” means a group of promoters and shareholders from the general public.
(c) If the resignation tendered by a Director from his/her position is approved,
(d) In case he or she commits any act that is not supposed to be committed under this Act or directives of Rastra Bank,
(e) If the Rastra Bank directs to remove from the office stating that since he or she carried out activities against the rights and interests of the bank or financial institution or of the depositors and as such he or she is not competent to perform the functions of a Director of the bank or financial institution.
(2) In cases where a bank or financial institution deems that any of its Directors is disqualified to remain in office of Director according to this Act or the Rastra Bank Act or he or she no more holds the position of Director, written information thereof shall be given to the Rastra Bank within fifteen days.
(3) The Rastra Bank may, if it has received in written form with regard to a Director that he/she is disqualified to remain in office pursuant to Sub-Section (2), issue appropriate direction after carrying out necessary enquiry.
20. Provision Regarding a Person Holding Constitutional Position: No person, who holds a constitutional position shall, so long as he/she is holding such a position, may remain in the Board of Directors or become the Chief Executive of any bank or financial institution.
21. Meetings of Board of Directors: (1) Meetings of the Board of Directors shall have to be held at least twelve times in a year.
Provided that the interval between the two meetings shall not exceed sixty days.
(2) The chairperson shall convene a meeting of the Board of Directors at any time if at least one-third of the Directors make a request in writing to convene a meeting by mentioning the agenda to be discussed in the meeting.
(3) Chairperson shall preside over the meetings of the Board of Directors. In the absence of the Chairperson, a Director selected by majority of the Directors from among themselves shall preside over a meeting.
(4) No meeting of the Board of Directors shall be held unless it is attended by at least fifty-one percent of the total number of Directors.
(5) The decision of a majority in the meeting of the Board of Directors shall be prevailed and in the event of a tie, the chairperson may exercise the casting vote.
(6) Minutes regarding the names of the Directors attending the meeting of the Board of Directors, the agenda discussed and the decisions taken thereon shall be recorded in a separate book, and such minutes shall be signed by all Directors attending the meeting:
Provided that if any Director puts forward any dissenting opinion in the decision of the Board of Directors, he/she may record his or her dissenting opinion in the minutes by putting his or her signature.
22. Functions, Duties and Powers of Board of Directors: (1) All functions, duties and powers to be exercised by a bank or financial institution, except those functions to be performed by the General Meeting, shall be vested in the Board of Directors subject to this Act, the prevailing laws and the Memorandum of Association and Articles of Association.
(2) It shall be the duty of the Board of Directors to operate the bank or financial institution in the interests of depositors, costumers and general shareholders by taking the overall risks management of the bank or financial institution and to give guarantee not to intervene in the day to day of business of the bank of financial institution in matters such as collecting, deposits, lending, making investment, managing personnel, making expenses from budget by maintaining appropriate corporate governance in the bank or financial institution.
(3) Other functions, duties and powers of the Board of Directors shall be as
follows:-
(a) To frame the necessary Byelaws, Directives, procedures subject to this Act, the prevailing laws and directives of the Rastra Bank and
to enforce them in order to carry out the functions of the bank or financial institution in an orderly manner,
(b) To prepare and enforce the internal control system and risks management guidelines for avoiding the emergence of risk or risk-prone situations in the transactions of the bank or financial institution and to carry out banking and financial transactions carefully according to its policies and strategies,
(c) To make the necessary policy for carrying out all the business of the bank or financial institution and to operate the bank or financial institution in an orderly and rational manner by carrying out regular monitoring of such business,
(d) To prepare the organizational structure of the bank or financial institution clearly and frame policies and implement them accordingly,
(e) To submit the General Meeting the audit report along with the annual progress report of the bank or financial institution,
(f) To carry out other functions as may be specified by the Rastra Bank from time to time.
23. Responsibility and Accountability of Director: (1) A Director shall not commit or cause to be committed any act for personal benefit through a bank or financial institution or in the course of the business of the bank or financial institution.
(2) A Director shall be personally liable for any act carried out exceeding his/her authority as of a Director of a bank or financial institution.
(3) A Director of a bank or financial institution shall assume responsibility with regard to the risks management and internal control by following sound business strategies of the institution.
(4) A Director shall not intervene in the day to day businesss and activities of the management of a bank or financial institution.
(5) A Director shall have to fully comply with the directives issued by the Rastra Bank from time to time.
24. Details of Directors to be Collected: A bank or financial institution shall collect the following details of a Director: –
(a) Name, surname, address, academic qualifications, occupation and experience of its Director,
(b) Details as to the designation and responsibility if he/she has worked earlier as a Director, official or employee of any other entity,
(c) Details as to name and surname of the family of the Director and the relevant person’s details and financial interests of himself/herself or his/her family in a bank or financial institution or other entities, share ownership in his/her name and names of the family of the said institution,
(d) Details as to the shares and debentures subscribed by the Director or his/her family members in the bank or financial institution or its holding or subsidiary company,
(e) Details of the family members working as office bearer or employee in the bank or financial institution, if any,
(f) Details as to whether the concerned bank or financial institution has, or is going to have, any type of contract with himself/herself or his/her family member,
(g) Details as to whether there is any type of interests or concerns with regard to the appointment of the Chief Executive, Company Secretary and Auditor,
(h) Written authority given to the Rastra Bank to allow it to conduct an inquiry or to cause to be conducted the inquiry into the financial and professional background of the Director,
(i) Self-declaration that he/she is qualified to be a Director pursuant to this Act,
(j) Any other details as may be specified by Rastra Bank from time to time to be furnished before the Rastra Bank and the Board of Directors.
25. Information of Director and Record: (1) A Director shall have to submit the details referred to in Section 24 to the bank or financial institution within seven days of his/her appointment.
(2) The bank or financial institution shall separately maintain the records of the details submitted pursuant to Sub-Section (1).
(3) In case a Director or any member of his/her family has substantial ownership of or any type of interests in the bank or financial institution directly or indirectly, such a Director shall provide the full details thereof at the first meeting of the Board of Directors.
(4) A Director shall, in cases where discussions are to be held as a meeting of the Board of Directors or of any other sub-committee on any subject concerning any interests of the Directors concerned, disclose about such interests at the very beginning of the meeting and he/she shall not take part in the discussions or restrain from voting on such subjects.
(5) In cases where there is any change in the details as referred to in Sub-Section (1) or a Director has been changed, information thereof shall be submitted to the Rastra Bank within fifteen days.
(6) The Rastra Bank, if it deems it appropriate to conduct an inquiry into the information forwarded pursuant to Sub-Section (5), shall have the powers to conduct or cause to be conducted inquiry into the same.
26. Power to Constitute Sub-Committees: (1) Except as expressly provided for in this Act that particular work shall be carried out by any particular entity or official, the Board of Directors may constitute one or more sub-committee(s) for any specific purpose subject to the directives of the Rastra Bank:
Provided that the Chairperson of the Board of Directors shall not be on the sub-committee.
(2) The functions, duties, powers and rules of procedure of the sub-committee constituted pursuant to Sub-Section (1) and the remuneration or allowances receivable by a member attending its meetings shall be as specified by the Board of Directors and the functions carried out by such a sub-committee and expenditures incurred by it shall be clearly specified in the annual report.
27. Delegation of Power: The Board of Directors may, stating the rational and reasons, delegate any of its powers to any Director, a sub-committee constituted pursuant to Section 26, the Chief Executive or any person acting as the Chief Executive of the bank or financial institution on the conditions that such powers shall be exercised under its supervision or direction.
28. Allowances and Facilities of Director: Meeting allowances and other facilities of a Director for attending a meeting shall be as provided for in the Articles of Association.
29. Appointment of Chief Executive and Terms and Conditions of Service: (1) The Board of Directors shall, subject to this Act, Memorandum of Association and Articles of Association appoint a Chief Executive for the management of a bank or financial institution.
(2) The tenure of office of the Chief Executive shall be for a maximum period of four years and he/she may be re-appointed for one more term of office.
(3) The provisions referred to in Sub-Section (2) shall be applicable only after the commencement of this Act.
(4) Notwithstanding anything contained in Sub-Section (2), the Board of Directors may remove the Chief Executive from his/her office at any time; if his/her work performance has not been satisfactory:
Provided that before removing from him or her office, a reasonable opportunity shall be provided to submit his or her clarification.
(5) While appointing a Chief Executive, a person having possessed the following qualifications and experience shall be appointed and information thereof shall be furnished to the Rastra Bank within seven days from the date of appointment: –
(a) If he or she holds a Master’s degree in management, banking, finance, monetary, economics, commerce, accountancy, statistics, accounting, mathematics, business administration or law,
(b) If he or she has work experience of at least ten years at an officer level or above in the banking or finance sector, government entity, corporate body, university or an international institution or organization performing similar functions after having earning a bachelor’s degree in chartered accountancy or management,
banking, finance, monetary, economics, commerce, bookkeeping, statistics, accounting, mathematics, business administration or law:
Provided that in the case of the Chief Executive of a Class “D” financial institution, he or she shall have to possess the academic qualifications and work experience as specified by the Rastra Bank.
(c) If he or she fulfills the criteria as prescribed by the Rastra Bank with regard to appointment of a Chief Executive,
(d) If he or she is not disqualified pursuant to Sub-Section (1) of Section 18: Provided that the disqualifications as referred in Clauses (i) and (n) of Sub- Section (1) of Section 18 shall not apply to the Chief Executive.
(6) The Rastra Bank may, in cases where, it is found that a Chief Executive appointed pursuant to Sub-Section (1) is not qualified according to this Act, issue an order to the concerned bank or financial institution to remove the Chief Executive and to appoint another person qualified to get appointed in the office of Chief Executive.
(7) The remuneration and terms and conditions of service and other facilities of a Chief Executive shall be as specified by the Board of Directors and the terms and conditions of service and facilities shall be fixed at the time of his/her appointment.
(8) The Chief Executive of any bank or financial institution shall not perform business as the Chief Executive, office bearer, employee or holds any other position in any other business organization:
Provided that nothing in this Sub-Clause prevents from becoming a Director of an Infrastructure Development Bank in which the bank or financial institution has made investment.
30. Functions, Duties and Powers of Chief Executive: (1) The functions, duties and powers of the Chief Executive shall be as follows:-
(a) To exercise the powers delegated by the Board of Directors and to implement decisions of the Board of Directors subject to the Memorandum of Association and Articles of Association and
oversee and control the activities and transactions of the bank or financial institution,
(b) To prepare the annual budget and any action plan of the bank or financial institution and submit to the Board of Directors for approval,
(c) To manage the necessary human resources subject to the Personnel Byelaws of the bank or financial institution,
(d) To implement or cause to be implemented the decisions of the General Meeting,
(e) To operate the institution according to this Act and directives of the Rastra Bank and to carry out effective internal control and risks management,
(f) To submit statements, documents, decisions, etc. to be submitted by the bank or financial institution to the Rastra Bank or any other agency on time subject to this Act, directives of the Rastra Bank and Memorandum of Association and the Articles of Association.
(g) To operate the institution taking into consist optimum protection of interests of depositors, shareholders and the institution itself,
(h) To apply appropriate criteria for senior management subject to the policy as determined by the Board of Directors.
(2) The Chief Executive shall be accountable to the Board of Directors for his or her work.
31. Prohibition on carrying out Banking or Financial Transactions by anyone other than Banks or Financial Institutions: (1) No one, except the bank or financial institution having obtained a license pursuant to Section 34, shall carry out banking or financial transactions according to this Act.
(2) The Rastra Bank shall formulate and execute a licensing policy concerning banks or financial institutions for the purpose of granting a license to banks or financial institutions.
32. Use of the Name of Banks or Financial Institutions: (1) No one shall use the name of a bank or financial institution for the purpose of carrying out banking and financial transactions without obtaining approval from the Rastra Bank.
(2) No person, company or institution, other than a bank or financial institution having obtained a license to carryout banking and financial transaction pursuant to Section 49 of this Act and a foreign bank or financial institution opening a branch office in Nepal, shall use in its name the words such as “bank”, “finance” or other words or symbol or adjective indicating a similar meaning without getting prior approval from the Rastra Bank.
(3) Notwithstanding anything contained in Sub-Section (2), the provision as referred to in Sub-Section (2) shall not be applicable to the following organizations:-
(a) Any organization established or recognized according to the existing laws, or international agreement or practice,
(b) A company submitting an application for carrying out banking and financial transactions within six months of incorporation.
(4) Notwithstanding anything contained in Sub-Section (2), any bank or financial institution which has obtained approval to carry out financial transactions according to the prevailing laws at the commencement of this Act may carry out financial transactions by using the name on having at the time of approval.
(5) Financial institutions of Class “B”, “C” and “D” shall use the name as “development bank”, “finance company” and “micro finance financial institution” respectively.
(6) An institution having obtained a license to use the name as a micro-finance development bank before the commencement of this Act shall use the name as referred to in Sub-section (5) after the commencement of this Act.
33. Application to be Made to Obtain a License for Carrying on Banking and Financial Transactions: (1) A bank or financial institution wishing for carrying out banking or
financial transactions pursuant to this Act shall make an application to the Rastra Bank for obtaining a license along with as the prescribed by the Rastra Bank.
(2) The bank or financial institution shall also enclose the following details and documents with the application to be made pursuant to Sub-Section (1): –
(a) A copy of the Memorandum of Association and Articles of Association of the bank or financial institution along with a copy of the certificate of incorporation according to the prevailing laws,
(b) Particulars of an office building equipped with all infrastructures required by the bank or financial institution to carry out financial transactions, or, if such a building is to be rented, a copy of the lease agreement and the particulars of the building to be rented, including particulars that there are enough grounds for making available banking and financial services and facilities,
(c) Documents evidencing that the amount of the shares undertaken to be subscribed by promoters is paid to and deposited in the Rastra Bank,
(d) Byelaws Relating to the Conditions of Service and Facilities of the Employees, Financial Administration Byelaws; and Bye-laws relating to Write-off of Loans of the bank or financial institution,
(e) Principal place of business or if addresses of the branches have been identified, addresses thereof,
(f) Consent that the terms and conditions specified by the Rastra Bank for carrying out banking and financial transactions will be abided by,
(g) A business plan prepared by incorporating the business strategy of the bank or financial institution, the organizational structure suitable to the nature of the transaction to be carried out, the internal control and risk management process,
(h) Name-list of the Directors and office bearers of the bank or financial institution and the details stating that they are qualified to become Directors and office bearers according to this Act,
(i) Commitment to meet the minimum capital adequacy ratio set by the Rastra Bank from time to time as long as the bank or financial institution carries out banking and financial transactions,
(j) Commitment that the bank or financial institution will maintain an internal control system for proper management of all potential risks,
(k) Other details and documents specified by the Rastra Bank from time to time.
(3) In the case of a bank or financial institution to be established in joint venture in Nepal by any foreign bank or financial institution, the following details and documents shall also to be submitted to the Rastra Bank in addition to those matters as set forth in Sub-Section (2):-
(a) In the case of a bank or financial institutions of Class “A”, “B”, “C” and “D”, a letter of consent or approval given by the government of the concerned country or the central bank or the regulating agency established according to the laws of the concerned country of foreign bank or financial institution, for carrying out banking and financial transactions in Nepal by such a foreign bank or financial institution,
(b) Upon submission of an application to the Rastra Bank to incorporate a foreign bank or financial institution or upon obtaining permission from the Rastra Bank, if any matter to be submitted by such a foreign bank or financial institution under this Act had not be submitted, details of that matter,
(c) Other information and documents as demanded by the Rastra Bank.
(4) The Rastra Bank may, if while upon carrying out an inquiry into the documents and details so received pursuant to Sub-Sections (2) or (3), finds that any documents or details are not adequate or sufficient, ask for additional documents or details from the concerned bank or financial institution.
34. License may be granted for carrying out Banking and Financial Transactions:(1) In cases where, the Rastra Bank finds, while carrying out inquiry into the application received pursuant to Section 33 and documents and details enclosed therewith, that all requirements to carry out banking and financial transactions according to this Act have been met, the Rastra Bank may issue a license of any class based on the classification of the bank or financial institution as referred to in Section 37 within one hundred twenty days to carry out banking and financial transactions.
(2) The Rastra Bank shall, before issuing a license pursuant to Sub-Section (1), ascertain the following matters:-
(a) That granting of a license for carrying out banking and financial transactions will result in development of healthy competition and effective financial intermediary transactions thereby the result in protection of interests of depositors,
(b) That it is capable of carrying out banking and financial transactions subject to this Act, Rules, Byelaws framed thereunder, Orders or Directives issued as well as Memorandum of Association and Articles of Association,
(c) That the documents and details submitted along with application pursuant to Section 33 for a license are sufficient and adequate physical infrastructures in place,
(d) That any official appointed or involved or to be appointed or to be included in the bank or financial institution is capable of carrying out banking and financial transactions.
(3) In cases where the Rastra Bank has specified the date of commencement of a license while issuing a license to carry out banking and financial transactions, the license shall be deemed to have been commenced from that specified date and if no such date has been specified, the license shall be deemed to have been commenced from the date of the issuance of the license.
35. Power to Refuse to Grant a License: (3) Notwithstanding anything contained in Section 34, the Rastra Bank may refuse to grant a license to operate banking and financial transactions to a bank or financial institution in any of the following circumstances:-
(a) If it causes adverse effects on the stability, fair competition and credibility of the financial system of Nepal,
(b) If it is not reasonable and appropriate to issue a license for operation of financial transactions for the protection of the interests of depositors,
(c) If the infrastructure to operate banking and financial transactions are not completed,
(d) If other particulars or conditions set forth in this Act are not found to be fulfilled.
(2) The Rastra Bank shall, in cases where, it is not possible to grant a license to operate banking and financial transactions pursuant to this Section, inform the concerned bank or financial institution accordingly stating the reasons thereof within ninety days of the date of filing of the application.
36. Power of Rastra Bank to Specify Conditions :(1) The Rastra Bank may, while granting a license for carrying out banking and financial transactions pursuant to Section 34, specify the necessary terms and conditions by giving consideration to the existing condition of the bank or financial institution, healthy operation of financial transactions and interests of depositors. It shall be the duty of the concerned bank or financial institution to abide by such terms and conditions.
(2) The Rastra Bank may bring necessary alterations and changes in the terms and conditions as specified pursuant to Sub-Section (1) from time to time as may be required.
37. Classification of Bank or Financial Institutions: The Rastra Bank shall, based on the minimum paid up capital of a bank or financial institution submitting an application pursuant to Section 33 for carrying out banking and financial transactions and transaction to be operated on by such a bank or financial institution and working areas, classify banks or financial institutions in to classes “A”, “B”, “C” and “D” and issue a license to the concerned bank or financial institutions accordingly:
Provided that an infrastructure development bank shall not be included in any class.
38. Possibility of Being Converted into Higher Class of Bank or Financial Institution: (1) If a bank or financial institution of lower class wishes to be converted into a bank or financial institution of one level higher class, it shall submit an application to the Rastra Bank alongwith the details as specified by the Rastra Bank.
Provided that class “D” institutions cannot be converted into a higher class.
(2) If the Rastra Bank deems appropriate, upon carrying out inquiry into the application and details enclosed with the application as set forth in Sub-Section (1), to convert a bank or financial institution as a bank or financial institution of a higher class, it may grant prior approval subject to the following terms and conditions:-
(a) That it has made payment of the paid up capital requirement for a bank or financial institution of a higher class as prescribed by the Rastra Bank,
(b) That it has been continuously maintaining the capital fund adequacy according to the Rastra Bank directives for the last five years, that it is in profit continuously for the last five years, and the average non-performing loans of the last five years are a within the limits as prescribed by the Rastra Bank,
(c) That the preliminary expenses have already been written off,
(d) That the shares to be issued publicly have been issued and already been allotted,
(e) That the General Meeting has already passed a special resolution for conversion into an upper class bank or financial institution,
(f) That it has met all the conditions as prescribed by the Rastra Bank.
(3) The Rastra Bank shall issue a license of an upper class bank or financial institution pursuant to this Act requiring to make amendments to the Memorandum of Association and the Articles of Association, of the bank or financial institution according to the prevailing laws having obtained prior approval pursuant to Sub-Section (2).
39. List to be Published: (1) The Rastra Bank shall publish a list of the banks or financial institutions carrying out banking and financial transactions every month in the national level newspaper or through any other means.
(2) The Rastra Bank may include the date of commencement of transaction, paid up capital, condition of capital fund, total loans, status of non-performing loans and other details as to deemed necessary by the Rastra Bank on the list to be published pursuant to Sub-Section (1).
40. Special Provisions Relating to Branches of Foreign Banks: (1) In cases where the Rastra Bank has granted a license to an internationally classified foreign bank to carry out
banking and financial transactions through a branch in Nepal, the branch so established in Nepal as per the prevailing company laws shall be deemed as equivalent to a bank or financial institution incorporated pursuant to this Act and unless otherwise provided by this Act or Rules, Byelaws, order or directives framed under this Act, all other provisions shall equally be applicable even in the case of such a branch.
(2) The Rastra Bank may issue the necessary directives with regard to the responsibilities of the officials and employees taking responsibilities of the functions, duties, powers, responsibility, liability, assets, accounts, etc. of a branch of a foreign bank.
(3) A branch of a foreign bank located in Nepal shall, while using its own assets in the course of bearing its responsibility, give first priority to its liability towards Nepal in such manner as not be prejudice to any legal provision.
(4) Notwithstanding anything contained elsewhere in this Act, a branch of a foreign bank may carry out wholesale banking transactions.
(5) The functions and activities of a branch office of a foreign bank shall be as prescribed by the Rastra Bank.
41. Capital to be Maintained :(1) The minimum paid up capital of a bank or financial institutions shall be as prescribed by the Rastra Bank from time to time.
(2) Banks or financial institutions shall fulfill the minimum paid up capital as set forth in Sub-Section (1) within the time frame as set by the Rastra Bank.
(3) The Rastra Bank may make provisions that requiring a person, firm, company or institution may only invest up to a maximum of fifteen percent of the paid up capital of any one bank or financial institution.
(4) While investing in other bank or financial institution by any person, firm, company or institution having investment in one bank or financial institution pursuant to Sub-Section (3), investment shall be made in such manners so that it shall be less than one percent of the paid up capital of the said bank or financial institution only.
(5) Provisions concerning investment by any person, firm, company or institution in the paid up capital of any bank or financial institution to be established in
foreign joint venture, a “D” class financial institution and infrastructure development bank shall be as prescribed by the Rastra Bank.
(6) The percentage of the share capital that may be invested by any person or institution in order to incorporate a bank or financial institution or invest in a bank or financial institution shall be as prescribed by the Rastra Bank from time to time.
42. Capital Fund: (1) A bank or financial institution shall have to maintain the capital fund in the ratio as prescribed by the Rastra Bank on the basis of its total assets or total risk-weighted assets. The Rastra Bank may, while prescribing such ratio, also prescribe the ratio of additional capital fund.
(2) In cases where a bank or financial institution fails to maintain the capital fund set forth in Sub-Section (1), the Board of Directors of such bank or financial institution shall furnish information thereof to the Rastra Bank within one month.
(3) The information set forth in Sub-Section (2) shall also be accompanied by, inter alia, the reasons for the failure to maintain the capital fund and the plans or programs prepared by the Board of Directors to increase the capital fund and restore it to the position as prescribed by the Nepal Rastra Bank.
(4) On receipt of the information as pursuant to Sub-Sections (2) and (3) , if the Rastra Bank deems the plan or program submitted by the Board of Directors reasonable, it may give directive to the concerned bank or financial institution to implement such plans or programs; and if any amendment or alteration is to be made in the proposed plans or programs it may give instructions to the concerned bank or financial institution to amend or alter such plan or programs stating the reasons for such amendment or alteration, and to implement the same.
43. Provisions Concerning Possible Loss: A bank or financial institution shall make provisions of loss as prescribed by the Rastra Bank so as to be able to cover its potential risks concerning assets including loans and liabilities incurring from the off balance sheet transactions.
44. General Reserve Fund: (1) A bank or financial institution shall maintain a general reserve fund. At least twenty percent of the net profits of each fiscal year shall be added until the paid up capital is doubled and at least ten percent shall be deposited in every fiscal year thereafter in such a reserve fund.
(2) The amount credited to the general reserve fund of a bank or financial institution pursuant to Sub-Section (1) may not be invested or transferred to any other headings or spent without obtaining prior approval of the Rastra Bank.
45. Exchange Equalization Fund: (1) A bank or financial institution carrying out foreign exchange business shall make necessary accounts adjustments in the profit and loss account of the revaluation profits earned as a result of fluctuations in the exchange rates of foreign currencies, other than the Indian currency, every year at the end of the same fiscal year. While making such accounts adjustment in the profit and loss account, if revaluation earning has been made in any fiscal year, at least twenty-five per cent of such profits shall be credited to the exchange equalization fund:
Provided that in the case of a revaluation profit-loss resulting from fluctuation in the exchange rate of the Indian currency, it shall be as prescribed by the Rastra Bank.
(2) No amount credited to the exchange equalization fund pursuant to Sub-Section (1) shall, without the approval of the Rastra Bank, be spent or transferred to other headings for any purpose other than the adjustment of loss resulting from the devaluation of foreign currencies.
46. Liquid Assets to be Maintained: A bank or financial institution shall maintain liquid assets as may be prescribed by the Rastra Bank from time to time.
47. Declaration and Distribution of Dividends: (1) A bank or financial institution shall obtain approval of the Rastra Bank before declaring and distributing dividends.
(2) No bank or financial institution shall be allowed to declare or distribute dividends to its shareholders until it recovers all of its preliminary expenses and the losses sustained by it until the previous year, capital as prescribed by the Rastra, capital fund, possible loss provisioning bank and for general reserve fund pursuant to Section 44 and until complete sale of shares to be allotted to the general public.
48. Power to Issue Order to Decrease Capital: Notwithstanding anything contained in the prevailing laws, the Rastra Bank may issue an order to decrease the issued and paid up capital of a bank or financial institution.
49. Powers of Banks or Financial Institutions to Carry out Banking and Financial Transactions: (1) A Class “A” bank may carry out the following banking and financial transactions subject to this Act, the Memorandum of Association and Articles of Association and the limitations, conditions and directions issued by the Rastra Bank:-
(a) To accept deposits or to mobilize deposits through various financial instruments and make payment thereof with or without interest,
(b) To accept deposits, making payments, carrying out transactions, carry out intermediary services and transfer funds to other headings through various electronic instruments or devices,
(c) To lend loans including hire-purchase, leasing, housing and overdrafts,
(d) To lend loans on collateral of project and hypothecation and lending or causing to be lend loans in consortium financing having divided the collateral on pari passu basis according to mutual agreement entered into between one another,
(e) To lend loans against the guarantee of foreign banks or financial institutions,
(f) To lend loans against the amount covered by the value of the movable or immovable assets which have already been mortgaged to it or lending loans on remortgage in own amount to be covered by the value of the movable or immovable assets which has already been mortgaged to other bank or financial institution,
(g) To issue guarantees on behalf of its customers and getting executed necessary bonds with such customers in consideration thereof, obtaining security, and acquire their movable or immovable assets as collateral or on mortgage, or the assets of third persons as collateral and to acquire, and hold the assets holding as security and to carry out other related transactions,
(h) To make get refinancing from the Rastra Bank as may be required or to lend or borrow loans from other bank or financial institution,
(i) To supply loans or managing loans from the amount received from the Government of Nepal or other national or foreign entity for promotion of a project,
(j) To write-off credits subject to the prevailing credits write-off Byelaws,
(k) To issue shares, debenture, debenture bonds and so on for the purpose of making the capital fund complete,
(l) To issue, accept, pay, discount or purchase and sell letters of credit, bills of exchange, promissory notes, cheques, travelers cheques, drafts or other financial instruments,
(m) To issue, accept and manage digital card or other instruments for electronic transactions and to appoint agents for carrying out acts relating thereto,
(n) To carry out foreign exchange business subject to the prevailing laws,
(o) To carry out government transactions subject to the limits, terms and conditions or directions of the Rastra Bank,
(p) To purchase, sell or accept treasury bills issued by the Government Nepal or bonds issued by the Rastra Bank,
(q) To remit or transmit amount to different places within or outside Nepal through bills of exchange, cheques or other financial instruments; receiving remittance from abroad and to make payment thereof,
(r) To take responsibility of and make arrangement for the sale or purchase of shares, debentures or securities; collecting interest, dividends etc. accruing from shares, debentures or securities; remitting or transmitting such interests or dividends to places within or outside Nepal; and arranging safe deposit vaults for customers acting as a commission agent of its customers,
(s) To carry out off-balance sheet transactions,
(t) To disburse credits upto the amount as prescribed by the Rastra Bank against individual or collective guarantee for the economic upliftment of the peoples from the deprived sector, low-income families, victims of natural calamities and inhabitants of any area of the country,
(u) To exchange details, information or notices concerning debtors or customers who have obtained credits from it or other banks or financial institutions with the Rastra Bank or any other bank or financial institutions,
(v) To buy and sell gold and silver bullions,
(w) To conduct, or cause to be conducted, study, research and survey relating to the establishment, operation and evaluation of projects, and providing training, consultancy and other information,
(x) To manage properly or sell its assets of every type coming under its ownership according to this Act and the prevailing laws,
(y) To give guarantee with the consent of the parties involved in matters of payment to be made or values to be recovered in consideration of any act between two or more persons, subject to the prevailing laws,
(z) To carry out such other business as may be prescribed by the Rastra Bank.
(2) Subject to this Act, the Memorandum of Association and Articles of Association and limitation and conditions imposed and directives issued by the Rastra Bank Class “B” financial institutions may, in addition to the banking and financial transactions as referred to in clauses (a), (b), (c), (f), (h), (i), (j), (k), (n), (p), (r), (s), (t), (u) and (x) of Sub-Section (1) carry out the following banking and financial transactions:-
(a) To lend credit in collateral of project, to make or cause to be made arrangements for jointly lending credits on the basis of consortium financing in collaboration with other banks or financial institutions in accordance with the mutual agreement entered into for the division of the collateral (pari passu)
(b) To issue guarantees on behalf of its customers and to cause to be executed necessary bonds with such customers, to acquire their movable or immovable assets as collateral or on mortgage, or the assets of third persons as collateral in consideration thereof,
(c) To issue, accept, make payment, discount or purchase and sell bills of exchange, promissory notes, cheques, travelers cheques, drafts,
(d) To accept loans in mortgage of its movable and immovable assets,
(e) To carry out transactions of letters of credit and remittance with the prior approval of the Rastra Bank,
(f) To take custody of and arrange for the sale or purchase of shares, debentures or securities, to collect interest, dividends etc. accruing from shares, debentures or securities, to make arrangement of safe deposit vaults for customers acting as a commission agent of its customers,
(g) To carry out transactions of transfer of amount within Nepal,
(h) To carry out, or cause to be carried out study, research and survey work relating to the project establishment and operation as well as banking, account, property, loan evaluation and to provide training, consultancy and other services and to provide information thereof,
(i) To carry out other functions as may be prescribed by the Rastra Bank.
(3) Subject to this Act, Memorandum of Association and the Articles of Association and the limitation and conditions imposed and directives issued by the Rastra Bank Class “C” financial institution may, in addition to the financial transactions referred to in clauses (a), (b), (f), (h), (j), (k), (p), (r), (t) (u) and (x) of Sub-Section (1) carry out the following financial transactions:-
(a) To disburse credit for hire-purchase, leasing, housing loans,
(b) To jointly disburse credits on the basis of consortium financing in collaboration with other banks or financial institutions in accordance with the mutual agreement entered into for the division of the collateral (pari passu),
(c) To take loans mortgaging its movable and immovable assets,
(d) To properly manage its assets, to sell or rent or lease them out,
(e) To issue, accept, make payment, discount or purchase and sell bills of exchange, promissory notes, cheques, travelers cheques or other financial instruments,
(f) To carry out the transaction of foreign currencies by obtaining approval from the Rastra Bank,
(g) To disburse installment or hire-purchase loans to any person, firm, company or institution for motor vehicles, machinery, tools, equipment, durable household goods or similar other movable property,
(h) To provide leasing finance to any person, firm, company or institution to hire vehicles, machines, tools or instruments, household durable goods, or similar types of movable assets or to accept or provide such goods on hire,
(i) To issue guarantees on behalf of its customers and to cause to be executed necessary bonds with such customers, to acquire their movable or immovable assets as collateral or on mortgage, or the assets of third persons as collateral in consideration thereof,
(j) To sell off or lease out its assets in whole in part,
(k) To prescribe prices of goods on consent with the finance institution and seller in cases where any goods procured has to be sold to other purchaser at the current price or deferred price,
(l) To carry out such other business as may be prescribed by the Rastra Bank.
(4) Subject to this Act, the Memorandum of Association, Articles of Association and limitation, conditions imposed and direction issued by the Rastra Bank Class “D” financial institution may, carry out the following banking and financial transactions:
(a) To disburse micro-credit, with or without any movable or immovable property as the collateral or security, for operating any micro-enterprise prescribed by the Rastra Bank to any project, any group or a member thereof that have regularly maintained the prescribed saving,
(b) To accept loans or grants from any bank or financial institution or national or foreign organization or institution, and use such loans or grants for the supply of micro-credit or for making the same effective:
Provided that approval of the Rastra Bank shall be obtained prior to obtaining loans or grants from any foreign organization or institution.
(c) Prior to disbursing micro-credits, to evaluate the schemes for which micro-credits have been requested and determine whether or not they are feasible,
(d) To provide necessary services and consultation to the groups with regard to the mobilization of micro finance,
(e) To take necessary actions for recovery of the micro credits on time,
(f) To accept deposits and refund such deposits subject to the limit prescribed by the Rastra Bank by getting approval of the Rastra Bank,
(g) To issue shares, debentures, bonds, etc. for the purpose of meeting the capital fund requirements,
(h) To exchange information or notices on borrowers or customers, who have obtained credit or any kind of facility from it and other bank or financial institutions, with the Rastra Bank or any other bank or financial institutions,
(i) To carry out such other functions as may be prescribed by the Rastra Bank.
(5) Subject to this Act, the Memorandum of Association, Articles of Association, and limits, conditions and directives of the Rastra Bank, infrastructure development banks may carry on the following transactions:-
(a) To disburse loans and investing in shares in projects relating to infrastructure development,
(b) To finance in securities of the companies operating projects relating to infrastructure development,
(c) To open letters of credits and issue guarantees for purchase, sale or supply or installation of machineries, equipment and tools required for construction and operation of projects relating to infrastructure development,
(d) To issue financial instruments in national or foreign currencies with the approval of the Rastra Bank for collecting fund required for investment in projects concerning infrastructure development and to acquire loans to that effect,
(e) To mobilize resources by accepting long term deposits or issuing debentures,
(f) To carry out leasing transactions with the approval of the Rastra Bank,
(g) To provide loans and facilities for projects by accepting guarantee of foreign banks and financial institutions,
(h) To carry out such other business as prescribed by the Rastra Bank.
50. Acts not Allowed to be carried out by Banks or Financial Institutions: (1) A bank or financial institution shall not carry out or cause to be carried out any of the following acts:-
(a) To purchase and sell goods with an objective of business and to construct buildings and to purchase immovable land and except those are necessary for its own purposes,
(b) To disburse credit against security of its own shares,
(c) To provide any type of credit facility to the Directors, persons having subscribed one percent or more than that of the paid up capital, the Chief Executive, or a member of family of such persons, or the firm, company or organization having significant ownership or financial interest in any person, firm, company or organization having the authority to nominate or appoint a Director or a managing agent,
(d) To provide credit or facility exceeding per customer limit prescribed by the Rastra Bank from its capital fund to a single customer, company, companies or partnership firms of the same group and relevant persons,
(e) To provide any type of credits to any person, firm, company or institution on the guarantee of promoters, Directors, or the Chief Executive,
(f) To make investment in the securities of a bank or financial institution of class “A”, “B” and “C”, as classified by the Rastra Bank,
(g) To invest any amount more than the limit as prescribed by the Rastra Bank in share capital of any other institution,
(h) To create any type of monopoly or other type of restrictive practices in banking and financial transactions in collusion with banks or financial institutions,
(i) To commit any act with a view for creating an artificial hurdles in the competitive environment in the financial sectors with a intention to get undue advantage,
(j) To carry out any other acts which are prescribed by the Rastra Bank as the business not be carried out by a bank or financial institution.
(2) Notwithstanding anything contained elsewhere in this Act, nothing shall prevent from carrying out own banking and financial transactions or providing housing or other facilities for its own employees according to the prevailing Personnel Byelaws of the bank or financial institution, disbursing any credit against the collateral security of the bond issued by the Government of Nepal or the Rastra Bank, making available credits against the amounts deposited in any account or fixed deposits receipts or from making available credits and credit card facilities up to the prescribed limit to promoters, Directors, Chief Executive or shareholders having subscribed more than one percent of shares against the collateral security of their own fixed deposit receipts, and the bonds issued by Government of Nepal or the Rastra Bank.
51. Provisions concerning Subsidiary Company: (1) A bank or financial institution may incorporate subsidiary company with the approval of the Rastra Bank.
(2) The Rastra Bank may prescribe the necessary terms and conditions while granting approval pursuant to Sub-Section (1).
52. Prohibition on carrying out transactions with relevant persons: No bank or financial institution shall be allowed to provide any type of loan or facility to the relevant persons.
53. Information of Suspicious Transaction to be furnished: A bank or financial institution shall identify its account holders and furnish information about any suspicious activity of its customer as per the prevailing laws relating to money laundering and prevention of terrorist financing.
54. Rastra Bank to issue Directives: The Rastra Bank may issue the necessary directives with regard to the procedural aspects and other matters to be followed by a bank or financial institutions while carrying out activities according to this Chapter.
55. Provisions Relating to Disbursement of Credits: (1) A bank or financial institution shall disburse credits only after disclosing the purpose subject to the directives issued by the Rastra Bank and the credit policy as determined by the Board of Directors.
(2) While disbursing credits, a bank or financial institution shall obtain any movable or immovable property acceptable to it as a collateral security or an appropriate guarantee in manners as to safeguard the interests of its own and of its depositors.
(3) A bank or financial institution shall write to the concerned office to withhold any property which it has taken as collateral security against a credit pursuant to this Section in the name of the bank or financial institution so that such property may not be registered in the name of, or transferred to, any person in any manner whatsoever.
(4) In cases where a request has been made for registration, transfer or to withhold pursuant to Sub-Section (3), the concerned office shall withhold the registration or transfer thereof accordingly.
(5) In cases where the Rastra Bank gives direction to disburse credits for such class and in such area as prioritized for the economic upliftment of the persons belonging to a low-income group and indigent class and of the inhabitants residing in any particular geographical region, banks or financial institutions shall disburse credits according to the direction.
(6) The terms and conditions, repayment schedule, and interests of the credits borrowed by a borrower shall be according to the deeds or contract executed between the bank or financial institution and the borrower.
(7) If the borrower is a guarantor, or firm, company or an institution, the directors, the shareholders having subscribed the shares in numbers more than the percent prescribed by the Rasta Bank or partners or owners in any manner thereof; members of the families of all of the above persons and if any of them is a beneficiary of any institution get all the details thereof and also get the proof of identity while taking actions according to the prevailing laws.
(8) While disbursing any credit by a bank or financial institution to anyone, the regular installment of the credit, interests thereon, damage thereon and the repayment schedule shall be clearly specified in a deed or contract and information thereof shall be given to the borrower and guarantor in case where there exists a guarantor.
(9) A borrower may make a request for details of the payable or paid amount of principal, interests, damage, and other fees and the deed or contract executed in the
course of availing the credit and banks or financial institutions shall make such details available accordingly.
56. Monitoring as to Utilization of Credit Amount: A bank or financial institution shall carry out regular monitoring by preparing a monitoring schedule as to whether or not the borrower has utilized the credit for the purpose for which it has been disbursed.
57. Provisions on Recovery of Credit: (1) Notwithstanding anything contained in a deed of a loan or in the prevailing Nepal law, a bank or financial institutions may recover its principal and interests thereon, having selling through auction the assets kept as mortgage by the borrower in the name of the bank or financial institution, if the borrower fails to abide by the terms and conditions of the credit as mentioned in the deed or contract or fails to repay the credit and interest thereon to the bank or financial institution within the loan repayment schedule stipulated in the deed or fails to pay the damage or if the bank or financial institution finds upon monitoring pursuant to Section 56, that the borrower has misused the credit by using it for the purpose other than the purpose for which it was disbursed.
(2) Notwithstanding anything contained in the prevailing laws, in cases where a borrower relinquishes the title in any manner whatsoever over the assets mortgaged or the assets mortgaged as collateral security to the bank or financial institution or if the value of the collateral security, a bank or financial institution may ask such a borrower to keep more assets as collateral security decreases within the time limit specified by it and the borrower shall keep place additional collateral security within the time-limit prescribed by the bank or financial institution.
(3) In cases where a borrower fails to keep more assets as collateral within the time limit pursuant to Sub-Section (2) or the principal and interests thereon could not be recovered from the collateral security so mortgaged, the bank or financial institution may recover its principal and interests from the other movable or immovable property of the borrower according to the prevailing laws.
(4) In cases where any balance has remained after deducting the amount spent in connection with an auction or otherwise during the recovery of the principal, interest thereon or amount of damage, such balance shall be refunded to the concerned borrower
upon deduction of the principal, interest and the amount of damage payable to the bank or financial institution.
(5) Banks or financial institutions shall write to the concerned office to register or transfer of the ownership of the assets so auctioned as per this Section in the name of the person accepting the auction in accordance with the prevailing laws.
(6) In cases where a bank or financial institution writes for registration or transfer the ownership of the assets pursuant to Sub-Section (5), notwithstanding anything contained in the prevailing laws, the concerned office shall register or transfer the ownership of the assets as requested in the name of the person who accept such an action.
(7) In cases where no one accepts the movable or immovable assets in the course of carrying out auction by a bank or financial institution pursuant to this Section, a bank or financial institution may take the ownership of such assets as prescribed in its own name.
(8) A bank or financial institution that has taken the ownership of the asset in question in its own name pursuant to Sub-Section (7) shall request to the concerned office shall, In cases where such a request has been received notwithstanding anything contained in the prevailing laws, the concerned office shall register or transfer the ownership of the assets in the name of the concerned bank or financial institution.
(9) If the previous owner does not allow or obstruct the exercise of the possessory right over the property, accepted by any person or a bank or institution through auction, the concerned office of the Government of Nepal shall cause to be erased the possessory right over the property in question.
(10) No one shall not be entitled to hinder the recovery process of the credit written off by a licensed institution in accordance with the prevailing Credit Write-off Byelaws.
(11) In cases where a borrower does not repay the credit from a bank or financial institution and the interests accrued thereto and damage within the time limit stipulated in the deed of the credit or the contract, the bank or financial institution shall write to the Credit Information Center Limited to blacklist the borrower according to the prevailing laws.
(12) In cases where a credit could not be recovered even after taking actions against the borrower under this Section, the bank or financial institution may, for the purpose of recovering such credit amount, take actions for the recovery of the credit according to the prevailing laws including freezing of any other assets of the borrower located in a foreign country if it is possible.
(13) In cases where a credit could not be recovered even after taking all actions under this Section, the concerned bank or financial institution may request the Rastra Bank for making the necessary arrangements to withhold or confiscate the passport of the concerned borrower and to deprive him of any particular services to be made available by the State. Upon receipt of such request, the Rastra Bank shall forward the request to the Government of Nepal for necessary actions along with its opinion.
(14) Nothing herein is deemed to prevent taking legal actions for any offence as per the prevailing laws on the ground that a bank or financial institution had taken action against a person in connection with the recovery of its credit.
58. Accounts to be Maintained Accurately: (1) Banks or financial institutions shall maintain their accounts, books, records accurately and in an up to date manner.
(2) The accounts to be maintained pursuant to Sub-Section (1) shall have to be maintained according to recognized principles of the double entry book keeping system reflecting the exact status of transactions of the bank or financial institution.
(3) Without prejudice to the generality of Sub-Sections (1) and (2), a licensed branch or office of a foreign bank or financial institution obtaining license shall prepare and maintain financial statements including separate accounts, books and records of its assets, liabilities, income and expenses and profit and loss accounts.
(4) Unless otherwise approved by the Rastra Bank, the accounts and other statements to be maintained pursuant to Sub-Section (1) shall be maintained at its central office.
59. Balance-sheet, Profit and Loss Accounts to be Prepared: (1) Banks or financial institutions shall prepare and maintain its balance-sheet, profit and loss account and cash
flow statement and other statements in such format and in such manner as prescribed by the Rastra Bank.
(2) Banks or financial institutions shall submit their balance-sheet and profit and loss account to the Rastra Bank within three months of the completion of each fiscal year and details of such balance-sheet and profit and loss account shall be made public for information of the general public as prescribed by the Rastra Bank within that period. Banks or financial institutions shall make public the audited balance-sheet of Fiscal Year and profit and loss accounts of the transactions within and outside Nepal in such formats as prescribed within nine months of the next fiscal year.
(3) If a bank or financial institution has a subsidiary company, the balance-sheet and profit and loss accounts and status of the transactions of business of the subsidiary company and parent company shall be maintained separately as well as in an integrated manner.
(4) The format, contents, methods of certification and details of the matters to be made public in the balance-sheet and profit and loss accounts to be prepared by a bank or financial institutions pursuant to this Chapter shall be as prescribed or directed by the Rastra Bank.
(5) If the Rastra Bank doubts that a matter made public by a bank or financial institution pursuant to Sub-Section (2) is erroneous, incomplete, misleading or false, it may cause by giving a notice in writing the concerned bank or institution to do the following:-
(a) To publicize the matters omitted or not stated, or
(b) To re-publicize the details which are erroneous, incomplete, misleading or false by correcting them, or
(c) To publish by making correction of the matters as required by directives of the Rastra Bank.
60. Audit Committee: (1) The Board of Directors of a bank or financial institution shall constitute an Audit Committee comprising three members under the convenorship of a non-executive Director.
(2) The Chairperson of a bank or financial institution, convener of the sub-committee and the Chief Executive shall not work in the audit committee referred to in Sub-Section (1).
(3) Members of the committee referred to in Sub-Section (1) shall not be entitled to be engaged in collecting deposits, disbursing credits, investing in securities, and making decisions in any daily transaction that requires for making expenses out of the approved budget.
(4) Except where a meeting has been called by the Board of Directors, meeting of the Audit Committee shall normally be held once in three months.
(5) Procedures of the meetings of the Audit Committee shall be as determined by the committee itself.
61. Functions, Duties and Powers of the Audit Committee: Functions, duties and powers
of the Audit Committee shall be as follows:-
(a) To ascertain whether or not the accounts, budget and internal auditing procedures, internal control mechanism of the bank and financial institution are appropriate and if they are appropriate, to carry out monitoring and supervision as to whether or not they are complied with,
(b) To cause to carry out internal auditing of the accounts and books of records of the bank or financial institution and to ascertain as to whether or not such documents have been prepared accurately according to the prevailing laws, regulations and directives of the Rastra Bank,
(c) To conduct or to cause to be conducted regularly auditing of the management and operation, managerial and work performance of the bank or financial institution to ensure that the laws in force in the bank or financial institution are fully complied with,
(d) To carryout monitoring as to whether or not activities have been carried out according to this Act or Rules made thereunder, Byelaws, policies or the directives issued in the bank or financial institution and to submit the report thereof to the Board of Directors,
(e) To recommend the names of three auditors for appointment of the external auditor,
(f) To furnish opinion on matters as requested by the Board of Directors.
62. Auditing: (1) A bank or financial institution shall, within four months from the date of completion of the Fiscal Year, prepare the balance sheet, profit and loss account, cash flow statement and other financial statements in such formats and according to such methods as specified by the Rastra Bank and get the external audit carried out. Such financial statements shall be signed by at least two Directors, the Chief Executive and the auditor:
Provided that in the case of a branch office of a foreign bank or financial institution carrying out financial transactions with the approval from the Rastra Bank, it shall be as prescribed by the Rastra Bank.
(2) In cases bank or financial institution that has failed to the auditing to be carried out within the period referred to in Sub-Section (1) makes a request for an extension of time for the auditing stating reasonable cause, the Rastra Bank may extend the period upto two months.
(3) The external auditor shall submit the report of auditing performed by him or her to the concerned bank or financial institution and the Rastra Bank as well.
63. Appointment and Remuneration of Auditor: (1) The appointment of an auditor shall be made by the General Meetings of a bank or financial institution.
(2) The General Meeting shall not appoint the same auditor for more than three consecutive terms.
(3) While appointing an auditor pursuant to Sub-Section (1), the General Meeting shall appoint a Chartered Accountant in the case of obtaining a licensed bank or financial institution of Class “A” or “B” or “C”, and a Chartered Accountant or a Registered Auditor in the case of a Class “D” bank or financial institution obtaining a license.
(4) If a bank or financial institution did not or could not appoint an auditor pursuant to Sub-Section (1), the Rastra Bank may appoint the auditor.
(5) If, for any reason, the position of an Auditor falls vacant, the Board of Directors shall appoint another Auditor for the remainder of the term.
(6) The remuneration of an auditor of a bank or financial institution shall be as determined by the Rastra Bank in cases where the auditor has been appointed by the Rastra Bank; as determined by the General Meeting in cases where the Meeting has appointed and as determined by the Board of Directors, in cases where the Board has appointed the Auditor.
64. Ineligibility for Appointment as Auditor: Any of the following persons or any firm, company or institution in which such a person is a promoter or partner shall not be eligible to be appointed as an auditor of a bank or financial institution: –
(a) A promoter, Director, Chief Executive of a bank or financial institution or his\her family member,
(b) An office bearer, employee or internal auditor of a bank or financial institution,
(c) A person working as a partner of any promoter, executive chief or employee of a bank or financial institution,
(d) A borrower of a bank or financial institution, a person with significant ownership or the relevant person or a person having financial interests,
(e) A person who has been declared bankrupt in Nepal or abroad,
(f) A person, firm, company or institution having subscribed one percent or more shares of a bank or financial institution,
(g) A person, who has been convicted of any criminal offense by a court and a period of five years has not been lapsed after he\she served such a punishment,
(h) A person, who is disqualified to become an auditor according to the prevailing laws.
(2) If any person appointed as an auditor of a bank or financial institution is found to be ineligible pursuant to Sub-Section (1), his/her appointment shall be deemed to have been ipso facto void
65. Details to be Furnished: (1) A bank or financial institution shall, at all times, provide all such accounts, records, books, ledgers and other statements as demanded by an auditor in the course of performing audit.
(2) For the purpose of Sub-Section (1), the officer, responsible for providing accurate statement or answer as demanded, shall also furnish forthwith accurate statement or answer to the queries made by an auditor.
66. Functions, Duties and Powers of Auditor: (1) The functions, duties and powers of an auditor shall be as follows:-
(a) To conduct auditing of accounts and financial statements,
(b) To prepare an audit report by including audited accounts, balance-sheet, and profit and loss accounts and to submit them to the Board of Directors of the bank or financial institution,
(c) If it is found that irregularities were committed in the activities of a bank or financial institution or business were not being carried out in an appropriate manner and such matters may cause harms or loss to the bank or financial institution, to inform the same to the Board of Directors,
(d) To inform the Rastra Bank, if any of the following situation is like to arise:-
(1) Violation of the terms and conditions as prescribed by the Rastra Bank during issuance of the license or violation this Act or Rules, Byelaws, Directives framed under this Act,
(2) To cause adverse effect on the regular activities of the bank or financial institution,
(3) To prevent the auditor from submitting the audit report or ask to prepare a false audit report.
(2) An auditor shall have the power to inspect all documents the concerning accounts including ledger, books, account, voucher, and goods at any time and he or she may seek answers or explanations from a Director or office bearer of a bank or financial institution on matters, as he or she may deem necessary, in the course of performing his/her duties and carrying out his/her functions in an appropriate manner.
(3) An auditor shall specify the following matters in his/her report clearly:-
(a) Whether or not replies to the queries as per the demand were provided,
(b) Whether or not the balance sheet, off-balance sheet transactions, profit and loss account, cash flow statements and other financial statements, and so on have been prepared in such a format and in accordance with such procedures as prescribed by the Rastra Bank,
and whether or not they actually matched with the accounts, records, books and ledgers maintained by the bank and financial institution,
(c) Whether or not the accounts, records, books and ledgers have been maintained accurately in accordance with the prevailing laws,
(d) Whether or not any office bearer of the bank or financial institution has committed any act contrary to the prevailing laws or committed any irregularity or caused any loss or damage to the bank or financial institution,
(e) Whether or not credits have been written off as per the Credit Write-off Byelaws or directives of the Rastra Bank,
(f) Whether or not the transactions of the bank or financial institution have been carried out in a satisfactory manner as prescribed by the Rastra Bank,
(g) Matters to be informed to the shareholders,
(h) Matters prescribed by the prevailing laws and other matters as prescribed by the Rastra Bank requiring to be specified in the audit report by the auditor,
(i) Other suggestions which the auditor deems necessary to be furnished.
(4) The Rastra Bank may, upon receipt of the audit report, if it deems necessary, order the auditor of the bank or financial institution to carry out the following additional functions:-
(a) To submit additional information as required by the Rastra Bank concerning auditing,
(b) To further widen the scope of auditing of the bank or financial institution or its subsidiary company,
(c) To carry out other tests as specified by the Rastra Bank or recommended to the bank or financial institution in any particular subject.
67. Recommendation for taking actions against Auditor: (1) The Rastra Bank shall recommend to the concerned regulating authority to remove the name of an auditor, who
does not perform his/her duties as set forth in this Act, from the panel of the auditors prohibiting him/her to carry out audit of any bank or financial institution for one year to three years.
(2) In cases where recommendation has been received pursuant to sub-section (1), the concerned regulating agency shall take actions against such an auditor under the prevailing laws.
68. Auditor to Certify: An auditor shall mark any certify the accounts, records, books and ledgers audited by him/her by putting his /her signature thereon and also mentioning therein the date on which he/she has audited them.
69. Banks or Financial Institutions may be Merged or Acquisitioned: (1) A bank or financial institution may be merged with another bank or financial institution or a bank or financial institution may acquire another bank or financial institution by fulfilling the procedures prescribed by this Act and the Nepal Rastra Bank Act.
2. A class “D” financial institution may be merged with or such institution may acquire another institution of the same class:
. Provided that, an infrastructure development bank and a bank or financial institution may not be merged into each other and none of them may acquire the other.
3. Notwithstanding anything contained elsewhere in this Chapter, in cases where any of the following circumstances in regard to any bank or financial institution is found from an Inspection and Supervision Report of the Rastra Bank, the Rastra Bank may order by giving the reason thereof that any of its assets, liabilities, and business of such bank or financial institution merge or be merged into another bank or financial institution:-
a. The capital fund is inadequate or the financial position has been deteriorating for the last three years,
b. An act committed causing adverse effect on depositor’s interests and liabilities towards depositors or such a situation is existing,
c. It is necessary to enhance the competitive capacity at the national and international level for stability, development and promotion of the financial system.
4. Notwithstanding anything contained elsewhere in this Chapter, if any of the following circumstances is regard to a bank or financial institution is found from an Inspection and Supervision Report of the Rastra Bank, the Rastra Bank may, by giving the reason thereof, order such a bank or financial institution to acquire or cause to be acquired another bank or financial institution:-
a. In cases where more than one bank or financial institution belonging to single group of persons, firms and companies are in operation and there is an unhealthy financial relation,
b. In cases where the rights and interests of the depositors, ordinary shareholders, and other costumers could not be protected due to the negative impact, if the bank or financial institution is operated in the status quo,
c. In cases where system-based risks are increased and the licensed institution is unable to pay its liabilities,
d. In cases where shares have not been issued in the ordinary group within the prescribed time, the issued shares have not been sold or subscribed, or the prescribed minimum proportional paid up capital has not been met,
e. In cases where the bank or financial institution is subjected to actions of rapid reforms for three times or more or good governance has become weak due to arising of frequent disputes in the Board of Directors of the bank or financial institution.
5. While issuing an order by the Rastra Bank pursuant to Sub-Sections (3) or (4) for merger or acquisition of the bank or financial institution, it may specify the procedures thereof in such an order.
70. Application to be submitted for Merger or Acquisition: (1) In cases where any bank or financial institution wishes to merge or to be merged into another bank or financial institution, two or more banks or financial institution/s so wishing to merge or be merged shall decide the matter from their respective Board of Directors and submit a joint application to the Rastra Bank for getting approval in principle stating the following matters:-
a. Necessity of and justification for merger of the bank or financial institutions and general projection of the impact it is likely to cause in the banking and financial sector and fiscal system,
b. Latest auditor’s report of the bank or financial institutions wishing to merge or be merged including the audited balance-sheets, profit and loss account, cash flow statement and net worth and so on,
c. Arrangements made for protection of the interests of the creditors of the bank or financial institutions wishing to merge or be merged,
d. Actual report of the movable and immovable assets of the bank or financial institutions wishing to be merged and also period of repayment of liabilities,
e. Details of the management of employees of bank or financial institutions wishing to merge or to be merged,
f. Approval process under the prevailing laws concerning company and securities for the purpose of merger;
g. Preliminary agreement concluded for merger by the institutions;
h. Other details as specified by the Rastra Bank.
2. In cases where any bank or financial institution wishes to acquire another bank or financial institution, the concerned two or more banks or financial institutions shall decide the matter from their respective Board of Directors and then submit a joint application to the Rastra Bank for getting approval in principle stating the following matters:-
a. Necessity of and justification for the acquisition of the bank/s or financial institution/s and general projection of the impact it is likely to have in the banking and financial sector and fiscal system,
b. Latest auditor’s reports of the principal institution and of the target institution(s) including the audited balance-sheets, profit and loss account, cash flow statement and net worth and so on,
c. Details of the management of the employees of the principal institution and targeted intstiution,
d. Approval process under the laws concerning companies and securities,
e. Preliminary agreement concluded for acquisition of the bank or financial institution,
f. Other details as specified by the Rastra Bank.
3. The Rastra Bank shall conduct an inquire into the application submitted pursuant to Sub-Section (1) or (2) and in the course of the inquiry, the Rastra Bank may hold discussions with the applicants as and ask for additional documents as may be required.
4. If the Rastra Bank is satisfied upon inquiry carried out pursuant to Sub-Section (3), that the merger or acquisition would not have any negative impact on the development of banking and financial system of the nation and in fair competition and compliance with the prevailing laws, it may grant approval in principle for further continuation with the process of merger or acquisition and while giving such approval, it may specify additional conditions or issue additional directives.
71. Provisions Concerning Valuation of Assets and Liabilities:(1) Upon getting approval in principle of merger of bank/s or financial institution/s pursuant to Section 70, such banks or financial institutions shall appoint, with mutual consent a person, firm, company or institution that is at least capable for carrying out auditing of a banks or financial institutions for valuation of their respective assets, liabilities, and transactions and information thereof must be furnished to the Rastra Bank:
Provided that, banks or financial institutions may carry out such valuation to be conducted before submitting an application to the Rastra Bank.
2. Upon getting approval in principle to acquire a bank or financial institution pursuant to Section 70, the targeted institution shall get its assets, liabilities and transactions audited by an auditor appointed by the General Meeting or by the Board of Directors under the authority of the General Meeting.
3. An acquiring institution may also carry out comprehensive valuation of the assets and liabilities of the target institution.
4. If the Rastra Bank does not find actions of Valuator appointed pursuant to sub-Section (1) or (2) reliable, it may give an order to the concerned bank or financial institution to remove him/her and appoint another valuator.
5. The concerned bank or financial institution shall determine by the terms and conditions of services of the valuator.
6. While valuating the assets, liabilities, net worth, and overall transaction by the valuator, it has to be carried out according to the established norms, basis and procedures.
7. The Rastra Bank may issue the necessary directives as to the methods of valuation, basis of valuation and the scope thereof.
72. Provisions Relating Agreement: Unless otherwise ordered by the Rastra Bank pursuant to this Act, the banks or financial institutions having obtained approval in principle for merger, amalgation or acquisition shall enter into an agreement stating the following matters:-
a. Provisions concerning the protection of the interests of depositors, creditors and shareholders,
b. Provisions concerning the valuation system and matching of assets and liabilities of the banks or financial institutions,
c. Provisions concerning management of investment and transaction, details of the inter-agency ownership and inter-agency transactions, details of guarantee and assurance, management of non-banking transactions, proper management of assets and liabilities,
d. Merger, merging and acquisition processes, the time to be taken and costs to be incurred,
e. Operation and management structure and the name list of Directors,
f. Arrangement for adjustment of level of employee of the bank or financial institution obtaining approval in principal for merger of acquision or of the principal institution and targeted institution and terms and conditions of services.
g. Details of the shareholders with substantial ownership and of other shareholders,
h. If the bank or financial institutions to be merged or acquired as a new bank or financial institution, the name, Memorandum of Association and Articles of Association, capital structure, restructuring and class thereof,
i. In the case of a foreign bank or financial institution, a letter of consent from the concerned regulating agency,
j. In the case of a foreign bank or financial institution, matters as to whether or not to acquire the business of a bank or financial institution located in Nepal, or if the entire business of such a bank or financial institution is to be sold in Nepal, matters relating thereto,
k. Grievance handling system of stakeholders,
l. The prevailing laws and process to be initiated for its compliance,
m. Other necessary details specified by the Rastra Bank.
73. Provisions Relating to Approval: (1) Banks or financial institutions getting approval in principle for initiating merger or acquisition process shall adopt special resolutions from their respective General Meetings and shall submit a joint application to the Rastra Bank having attached therewith the agreement referred to in Section 72 and other matters specified by the Rastra Bank for final approval.
2. While carrying out an inquiry into the application submitted pursuant to Sub-Section (1), the Rastra Bank, if it deems necessary, may ask for additional information or documents from the concerned bank or financial institution.
3. While carrying out an enquiry pursuant to Sub-Sections (1) and (2), the Rastra Bank may give due consideration to the facts that whether or not the merger of any bank or financial institution would create a healthy competition in the financial sector of the country, whether or not monopoly or restricted practice of any bank or financial institution may have; whether or not serious adverse impact would have cause on the overall banking and financial system on financial market and depositors and also having conducted fit and proper test of the promoter/s who may has/have significant ownership in the institution to be created after the merger, the Rastra Bank may grant final approval to the banks or financial institutions for merger with each other or acquisition by specifying terms and conditions or limitations.
4. The Rastra Bank shall, if it does not find to be appropriate to grant approval pursuant to Sub-Section (3), notify the concerned bank or financial institution along with the reasons thereof within forty five days.
5. In cases where it is difficult for the institutions that have obtained approval pursuant to Sub-Section (3) to comply with the provisions of this Act and directives of Rastra Bank by virtue of such a merger or acquisition, the Rastra Bank may grant exemptions as specified by it on the basis of necessity and rationality.
6. Other provisions concerning merger and acquisition shall be as specified by the Rastra Bank.
74. Transactions may be Acquired: Any branch, office of any bank or financial institution or any property or transaction thereof, with the prior approval of the Rastra Bank may be acquired by, or transferred to, any other bank or financial institution with mutual consent.
75. Voluntary Liquidation of Bank or Financial Institution: (1) Any bank or financial institution wishing to go for voluntary liquidation shall submit an application along with an action plan of voluntary liquidation.
2. In cases where the Rastra Bank is confident, upon carrying out an inquiry into an application submitted pursuant to Sub-Section (1), that such bank or financial institution or a branch or office of a foreign bank or financial institution is fully capable of repaying all of its credits and liabilities, it may grant approval in principle, along with some terms and conditions, for voluntary liquidation.
3. A bank or financial institution getting approval in principle from the Rastra Bank pursuant to Sub-Section (2) shall carry out the following functions:-
a. To inform the Office of the Companies Registrar that it has got an approval in principle within seven days from the date of getting such an approval;
b. To send notice to all depositors, creditors or concerned persons by fast, efficient and reliable means, about the approval in principle it got within thirty days from the date of getting such an approval;
c. To publish a notice in national newspapers that it has got an approval in principle within thirty days from the date of such approval
d. To perform other functions as specified by the Rastra Bank.
76. Initiation of Voluntary Liquidation :(1) The process of initiation of voluntary liquidation of a bank or financial institution shall be deemed to have been commenced from the date of granting the final approval for voluntary liquidation by the Rastra Bank.
2. A bank or financial institution that has got an approval in principle for voluntary liquidation pursuant to Section 75 shall fulfill the following conditions before getting final approval of voluntary liquidation from the Rastra Bank:-
a. That all the deposits and liabilities are refunded or fulfilled within the due date,
b. That operation of transactions are closed down and no new transaction to be carried out,
c. That exercise of other powers, except those essential for voluntary liquidation, shall not be allowed.
3. The Rastra Bank may issue the necessary directives in the course of carrying out functions pursuant to Sub-Section (2).
4. In cases where a person entitled to get payment of the amount and other liabilities pursuant to Clause (a) of Sub-Section (2) fails to come to receive the payment within the prescribed time-limit, the said amount shall be deposited to an account as directed by the Rastra Bank.
5. An approval of voluntary liquidation will not cause any type of adverse effect on the rights and interests of the depositors and other creditors.
(6) An bank or financial institution opting for voluntary liquidation shall, upon completion of the proceedings of this Act, submit to the Rastra Bank an auditing report of such a bank or financial institution.
7. The Rastra Bank shall grant final approval for voluntary liquidation to a bank or financial institution that performed the function as referred in this Section. The Rastra Bank shall revoke the license for carrying out banking and financial transaction of such a bank or financial institution.
8. The amounts to be paid by the bank or financial institution opting to go for voluntary liquidation for the deposits not claimed at the moment shall be separately set aside as directed by the Rastra Bank.
77. No Effect in Liability: There shall be no effect on the liability of any shareholder, Director, Chief Executive, office bearers, employees or other persons under to this Act or any other prevailing laws as a result of liquidation of any bank or financial institution under this Chapter.
78. Application may be filed before the Court for Mandatory Liquidation of Banks or Financial Institutions: (1) The Rastra Bank may file an application to the court for mandatory liquidation of any bank or financial institution under this Chapter and a notice of application of such action shall be published in a daily newspaper of national level.
2. The Rastra Bank shall attach the following documents along with the application filed before the court for initiation of the process of liquidation of any bank or financial institution pursuant to Sub-Section (1):-
a. Details along with the reasons for mandatory liquidation of the bank or financial institution that the situation referred to in Section 79 is continue to persist,
b. Financial statement of the bank or financial institution.
3. Notwithstanding anything contained in Sub-Section (1), any of the following persons may, with the prior approval of the Rastra Bank, file an application to the court for liquidation that there exists a situation specifying the reasons to show the situation that a bank or financial institution may be subjected to mandatory liquidation pursuant to Section 79 :-
a. A joint application of the depositors having representation of more than twenty-five percent of the total deposit, who do not get the payment of the payable deposits or of more than one percent of the depositors, or
b. A person competent to file an application for mandatory liquidation according to the prevailing laws relating to insolvency.
4. In cases where the court orders for initiation of the process of liquidation of a bank or financial institution based on the application referred to in Sub-Section (1) or (3), the process of mandatory liquidation of the bank or financial institution shall be commenced from the date of giving of such an order.
79. Circumstances leading to Mandatory Liquidation of Bank or Financial Institutions: A bank or financial institution may be subjected to mandatory liquidation under the following circumstances:-
a. In cases where the matured deposit or the deposit to be repaid immediately or other financial liability could not be paid on time and is in due,
b. In cases where the capital fund of a bank or financial institution is negative,
c. In cases where the Rastra Bank recommends for liquidation of a bank or financial institution based on an inspection report of the bank or financial institution,
d. In cases where the shareholders with significant ownership or office-bearer of a bank or financial institution frequently commit acts causing obstruction against the rights and interests of the depositors for the development of financial system,
e. In cases where it is found that it is in frequent violation of the this Act and directives given by the Rastra Bank,
f. In other circumstances as determined by the Rastra Bank for mandatory liquidation of a bank or financial institution.
80. Transaction to be Suspended:(1) The Rastra Bank shall immediately after submission of an application to the court pursuant to Section 78 for mandatory liquidation of a bank or financial institution, suspend the entire financial transactions of such a bank or financial institution.
2. The Rastra Bank may, while issuing an order for suspension of financial transactions pursuant to Sub-Section (1), revoke the license of such a bank or financial institution.
81. Appointment of Liquidator: (1) The court may issue an order to the Rastra Bank to make recommendation for appointment of a liquidator for initiating process of mandatory liquidation of any bank or financial institution.
2. In cases where the court issues an order pursuant to Sub-Section (1), the Rastra Bank shall recommend the names of at least three persons for appointment to the Liquidator within fifteen days.
3. While making recommendation to the court by the Rastra Bank pursuant to Sub-Section (2), it will make recommendations from among persons having experience in the banking and financial sector and having a license to act as insolvency practitioners according to the prevailing laws.
4. The court may appoint one of the three persons recommended pursuant to Sub-Section (2) as liquidator.
5. After a Liquidator has been appropriated pursuant to Sub-Section (4), the Board of Directors of such bank or financial institution shall be deemed to have been ipso facto dissolved and unless otherwise ordered by the Liquidator, services of the entire office-bearers and employees appointed by the bank or financial institution shall ipso facto be terminated.
6. If the Liquidator appointed pursuant to Sub-Section (4) tenders his or her resignation, dies or the Rastra Bank deems that he/she is incompetent to perform the prescribed functions, the Rastra Bank shall file an application to the court according to this Section to appoint another Liquidator by removing such a liquidator.
7. The remuneration and terms and conditions of services of a liquidator shall be as prescribed by the court on the recommendation of the Rastra Bank.
82. Functions, Duties and Powers of Liquidator:(1) A liquidator appointed for the purpose of initiating the process of mandatory liquidation of a bank or financial institution shall, after his/her appointment, carry out the following actions:-
a. To publish a notice in a national level Nepali and English daily newspaper for information of shareholders and other concerned persons of the bank or financial institution within fifteen days of the appointment,
b. To send to the Office of the Company Registrar and the institution established as per the prevailing laws for guarantee of deposits for information with an authenticated copy of the order of mandatory liquidation within fifteen days of the appointment;
c. To post or cause to be posted a copy of such an order in a conspicuous manner at the principal place of business of the bank or financial institution and at each of its offices,
d. To broadcast the notice through a national level television and radio for four weeks at least once in a week after the appointment,
e. To perform such other functions as specified by the Rastra Bank.
2. After getting information as referred to in Clause (b) of Sub-Section (1), the Office of the Company Registrar shall make in the concerned registration book that an order of initiating the process of mandatory liquidation has been issued.
3. In addition to the functions, duties and powers as referred to elsewhere in this Act, the other functions, duties and powers of a liquidator shall, subject to the directives of the Rastra Bank, be as follows:-
a. To take custody of the office, books and accounts, records and assets of the bank or financial institution,
b. To carry out most essential regular functions of operation and management of the bank or financial institution,
c. To carry out all the functions to be carried out on behalf of or in the name of the bank or financial institution,
d. To appoint employees to render assistance in its functions,
e. To make the necessary expenses for operation, management and liquidation of the bank or financial institution,
f. To make coordination with institutions established by the prevailing laws for security of deposits,
g. To exercise all the powers to be exercised by the shareholders, General Meeting, Board of Directors and office-bearers of the bank or financial institution,
h. To carry out inquiry into the business and financial status of the bank or financial institution,
i. To merge or transfer the entire or some of the assets and liabilities of the bank or financial institution with another bank or financial institution with the approval of the Rastra Bank,
j. To get credit in mortgaging of the bank or financial institution,
k. If it is felt that it will be beneficial for the bank or financial institution to sell any assets or terminate any contract or liability, to sell such assets or to terminate such contract or liability,
l. To procure services of professional and qualified persons to render assistance in its functions as may be necessary,
m. To hold necessary discussions and enter into compromise with any creditor or borrower of the bank or financial institution,
n. To collect, protect and sell the assets of the bank or financial institution and to distribute according to this Act,
o. To conduct an inquiry into whether or not a Director, office bearer, employee, or any other person has committed fraud, cheating, or misrepresentation against the bank or financial institution or depositors or creditors and to take the necessary legal actions against them or to file any case or initiate a legal action on behalf of the bank or financial institution or to defend on behalf of the bank or financial institution,
p. If anyone has been using any property of the bank or financial institution, to withdraw it or to take legal actions to take such property or cash amount from the transaction which has been declared invalid back,
q. To prepare a report in every three months on the actions taken in the course of liquidation in such format as specified by the Rastra Bank and to submit it to the Court and Rastra Bank,
r. To carry out all other functions as may be required for liquidation of the bank or financial institution,
s. To perform other functions as prescribed by the Rastra Bank.
4. If any difficulty arises in the course of exercising any power or discharging any duty by a Liquidator under this chapter, he/she may file an application to the court to remove such difficulty.
5. In cases where the reasons stated in the application submitted pursuant to Sub-Section (4) are found to be reasonable, the Court may issue an appropriate order.
83. Effects of Order Relating to Liquidation: (1) In cases where the court orders for initiating the process of mandatory liquidation of any bank or financial institution, the order shall result in the following on the following matters:-
a. In cases where statuary limitations have expired as to any claim or right of the bank or financial institution, the statuary limitations of such claims or rights shall ipso facto be extended for upto six months from the date of issuing an order by the court to initiate the process of mandatory liquidation.
b. Except in circumstance as provided for in Clause (c), if any property or asset of a bank or financial institution has been withheld for any reason whatsoever, or such property has been mortgaged against any credit made available to the bank or financial institution, such property or asset shall ipso facto be released.
c. The functions concerning accepting deposits and lending credits shall ipso facto be stopped.
d. Case proceedings against the bank or financial institution in any court shall ipso facto be stopped and unless otherwise ordered by the court, court proceedings against such bank or financial institution shall not be revived:
Provided that in cases where there is any case sub-judiced at the Supreme Court as to the bank or financial institution, or it is necessary to seek clearance from the Supreme Court, the Rastra Bank shall file an application to that Court.
e. No interests or any type of additional charge shall be levied on the liabilities of the bank or financial institution.
f. Shares of such a bank or financial institution may not be transferred, mortgaged or stroke out its title:
. Provided however that the act of transfer, mortgage or striking out may be carried out with prior approval of the Rastra Bank.
2. If it comes to the knowledge of a Liquidator from any source that any action carried out before six months from the date of issuing an the order by the court to initiate the process of mandatory liquidation may harm or cause loss to the interests of the depositors or creditors of the bank or financial institution, the Liquidator shall submit to the court an application about it and information thereof shall also be given to the Rastra Bank.
3. In cases where the court finds from the application submitted pursuant to Sub-Section (2) by a Liquidator that any of the following actions was carried out, the court may declare such an action null and void:-
a. If a decision was made to offer a gift,
b. If any act that cause may harm to the rights and interests of the creditors or depositors was committed,
c. If payment was made or transferred before repayment of credits or the collateral was released, transferred or stroke out the title before the expiration of the term of the credit,
d. If a contract was executed with a view to imposing additional liabilities on the bank or financial institution that the ones normally prevailing practice in the course of operating any business,
e. If any agreement or transaction, other than those regular banking or financial transactions permissible under this Act, is found to have been executed,
f. If a contract was made with a view to providing employment to the relevant persons.
4. In cases where any bank or financial institution is subjected to mandatory liquidation, the following transactions shall be void:-
a. Preferential transactions made immediately before six months of the initiation of the process of mandatory liquidation or within the period of six months after initiation of the process,
b. Preferential transactions made with the relevant persons immediately before one year of the initiation of the process of mandatory liquidation or within the period of one year after initiation of the process,
c. Transaction as a result of which a bank or financial institution is subjected to mandatory liquidation, with a lower price immediately before one year of the initiation of the process of mandatory liquidation and other transactions made with low a lower price made within one year after initiation of the process;
d. Fraudulent transactions made immediately before two years of the initiation of the process of mandatory liquidation or within the period of two years after initiation of the process;
5. The Liquidator shall have to file an application to the court to cause to make transactions referred to in Sub-Section (4) as void.
6. If the court is satisfied that certain transaction are void, the court may issue the following order:-
a. To order the concerned person to pay to the Liquidator all or some of the amount the payment of which made by the bank or financial institution with regard to such transactions,
b. To order the concerned person to handover the assets so transacted or to pay the equivalent value to the Liquidator,
c. To issue an order to exempt or release, in whole or in part, the credit the bank or financial institution has availed, the security or collateral pledged by the bank or financial institution against that credit,
d. To issue an order to make any executed pardon, surrender or agreement concluded between the bank of financial institution and another person as void, ineffective or implementable as a result of the voidable transaction,
e. If additional order is required to be given for the execution of the order given under this Sub-Section, the court shall issue such an order as well.
7. In cases where any Director, office bearer, employee or any other person is found to have committed the acts referred to in Sub-Section (3) or (4) and the bank or financial institution has been suffering any loss or damage, they shall be liable to bear the compensation personally for such harm or damage.
84. Records of Assets and Liabilities: (1) A Liquidator shall immediately prepare a record of the assets, liabilities or potential liabilities of a bank or financial institution which has gone into mandatory liquidation under this Act and a copy of which shall be submitted to the Rastra Bank and another copy shall be retained at the concerned bank or financial institution.
2. The records to be prepared pursuant to Sub-Section (1) shall include the following details:-
a. Liabilities towards the depositors and creditors of a bank or financial institution,
b. Details of the entire assets and all types of liabilities of the bank or financial institution, and their estimated costs,
c. Contracts that a bank or financial institution has entered into for procuring services,
d. Significant transactions, the bank or financial institution has made before six months of the date of an order issued for mandatory liquidation.
3. The record referred to in Sub-Section (1) shall be updated in every trimester and be made available for inspection by the creditors as and when they wish.
85. Power to terminate Transactions: (1) A Liquidator may terminate the following transactions of a bank or financial institution within six month of the date of order issued by the court for mandatory liquidation of the bank or financial institution:-
a. Any contract concluded by the bank or financial institution concerning employment,
b. Any contract concluded for any services in which the bank or financial institution is a party,
c. All functions and contracts being carried out by the bank or financial institution in its capacity as a trustee,
d. Any regular function or business of the bank or financial institution or branches of the bank or financial institution according to the need and circumstances,
e. Any liabilities said to be borne by the bank or financial institution without any limit,
f. Other functions or proceedings as specified by the Rastra Bank.
2. For the transactions terminated pursuant to Sub-Section (1), no any type of additional amount and compensation may be claimed other than the due amount to be paid or liability to be borne by the bank or financial institution till the date of the termination of the transaction.
86. Notice to submit claims: A Liquidator shall, upon initiating the process of mandatory liquidation of a bank or financial institution, within the time line specified by the Rastra Bank, publish a notice containing clearly the following details asking the persons having any claim of any type with the bank or financial institution to submit his/her details of claim within one month from the last date of publication of the notice stating his/her claims and the amount he/she may receive:-
a. To publish a notice in any daily Nepali and English languages newspaper of national level,
b. To place or cause to be placed such notices at the main places of businesses of the bank or financial institution and post it at every office in a conspicuous manner.
87. Power of Liquidator to Accept or Reject Claims: (1) The Liquidator shall, within ninety days from the date of submission of the claim pursuant to Section 86 carry out an inquire into the claims and accept or reject the claim in whole or in part based on the evidences collected and information thereof shall be given to the claimant and public notice thereof shall also be published.
2. A claimant having his/her claim accepted or rejected in part pursuant to Sub-Section (1) shall, within fifteen days from the date of publication of the notice thereof, have to submit his/her claims again enclosing the additional evidences, if any.
3. If there is a need to make any amendment to in the claims made pursuant to Sub-Section (2), the Liquidator may change in whole or in part.
4. In cases where a claimant is not satisfied with the decision of the Liquidator made pursuant to Sub-Section (1) or (3), the claimant may file an appeal at a court within twenty-one days of after the decision comes to the knowledge of the claimant.
88. Classification of Claims: (1) The claims accepted, accepted partially or rejected pursuant to Section 87 shall by a Liquidator be recorded separately segregating them under different headings.
2. The claims accepted in part pursuant to Sub-Section (1) shall be included in the accepted list to the extent of acceptance and the rest of the claims shall be included in the list of rejected claims.
3. While preparing a list of claims, the name and address of the claimant, place, date and amount of payment and details as to whether or not any collateral for securing the claim shall be clearly stated.
4. If there is a dispute as to a claim, such a claim shall be stated in the list of disputed claims until its decision is made.
5. A Liquidator shall enlist the approved claims and the claims having no value in the list as he/she has fixed.
6. The claims of the secured creditors shall be separately classified.
(7) The approved claims shall be listed in such manner as to be placed it on the priority list in the payment process.
89. Meeting of Creditors: (1) The creditors of a bank or financial institution having its mandatory liquidation process initiated may form a Meeting of Creditors for mutual discussions and agreement
2. Subject to the directives given and conditions as specified by the Rastra Bank, the Liquidator of a bank or financial institution subjected to mandatory liquidation process may negotiable and build consensus as with the creditors and borrowers of such bank or financial institution, as may be necessary.
90. Liquidation Plan:(1) The Liquidator shall, within 30 days after completion of classification of the claims pursuant to Section 88, prepare a detailed plan of action of the liquidation of the said bank or financial institution and submit it to the court for approval, and information thereof shall be given to the Rastra Bank as well.
2. The following matters shall be incorporated into the liquidation plan to be submitted pursuant to Sub-Section (1):-
a. Detail description of the assets and liabilities of the bank or financial institution and their nature and quantity,
b. The previous and projected income and expenditure of the bank or financial institution,
c. Detail description as to whether to continue the current financial transactions of the bank or financial institution or to revoke them,
d. Decision or order of the court,
e. Details of the proceedings taken for compensation from a Director, office bearer or employee for the offences and other unlawful acts they have committed,
f. Detail description as to the classification of claims and priority order of payment,
g. Plan of sale and liquidity of the main assets or group of assets of the bank or financial institution,
h. Liabilities of the bank or financial institution and table of details of the probable payment to be made to the depositors and creditors within the upcoming ninety days,
i. Costs and expenses of the mandatory liquidation,
j. Other details as specified by the Rastra Bank.
3. The Liquidator shall update the liquidation plan referred to in Sub-Section (1) on a quarterly basis.
4. Once the liquidation plan is approved by the court, the plan shall have to be made available to the creditors of the bank or financial institution for inspection, whose claims are stated in the plan.
5. Notwithstanding anything contained elsewhere in this Act, no bank or financial institution, which has been subjected to mandatory liquidation, shall be recapitalized by making full or partial financing.
91. Advance Payment may be made to Depositors Immediately: (1) Notwithstanding anything contained elsewhere in this Chapter, the depositors of the bank or financial institution subjected to mandatory liquidation may be distributed up to one hundred thousand rupees per account as advance with a condition to settle the account at the time of payment of the deposit.
2. The advanced payment made pursuant to Sub-Section (1) shall be adjusted while making payment pursuant to Section 94.
92. Power to Sell Assets: The Liquidator may, subject to the directives given by the Rastra Bank, auction off or cause to auction off the entire assets of a bank or financial institution being in the process of mandatory liquidation including the assets mortgaged as collateral security of the approved secured claim of the creditors bank or financial institution as follows:-
a. At the place of transaction of the securities, foreign currencies or other assets that may be sold easily in the market,
b. The securities given for security of the loan of the creditor, foreign currencies or other assets that may be sold easily in the market, by the creditors by themselves,
c. If the Liquidator deems that no reasonable price could be received through an auction of assets, to them in any manner whatsoever,
d. To make other provisions as prescribed by the Rastra Bank.
93. Notice of Settlement of Claims: The Liquidator shall, in order to settle the claims according to the liquidation plan as referred to in Section 90, publish and broadcast a public notice stating the nature, quantity and priority order for payment of the claims.
94. Order of Priority for Payment: (1) A bank or financial institution that has been subjected to mandatory liquidation shall pay its liabilities in the following order of priority:-
a. Expenses incurred for mandatory liquidation,
b. An amount upto the amount paid for deposits insurance security made under the prevailing laws not exceeding the limitation of total approved claimed amount of the depositor or an equivalent amount, if payment has been made to a deposit insurance security organization incorporated under the prevailing laws for security of deposit,
c. The deposits remaining after payment made pursuant to Clause (b),
d. Salary, allowances and amounts for other liabilities payable to the employees of the bank or financial institution,
e. Amount payable to the Government of Nepal, local bodies, or the Rastra Bank,
f. Outstanding amounts payable to other banks or financial institutions as fees or valuation amount,
g. Amounts payable to other creditors and other claims;
h. Shareholders according to the prevailing laws.
2. Notwithstanding anything contained elsewhere in this Chapter, in case where a creditor submits an application agreeing to accept any of the assets that was not sold while auctioning pursuant to Section 91 in lieu of the amount which the bank or financial institution has to pay him/her, the Liquidator may transfer such assets to such a creditor according to the value of the asset as fixed by the Rastra Bank in its criteria.
3. Notwithstanding anything contained elsewhere in this Chapter, in cases where any asset has been pledged as security for the secured creditors, such asset shall be used only for fulfilling the liability towards them.
95. Unclaimed Goods or Amount: In cases where a notice has been issued under this Chapter to receive the amount or goods according to the details of the claims or liabilities and if the concerned person fails to show up to receive the amount or goods within the specified time, such amount or goods shall be kept under the responsibility of the Liquidator or other entity according to the direction given by the Rastra Bank.
96. Decision of Liquidation: (1) The Liquidator of the bank or financial institution that has been subjected to mandatory liquidation or having its license revoked by the Rastra Bank shall after completion of the process of liquidation submit an application to the court along with the details of the activities carried out requesting for liquidation.
2. In cases where the Liquidator submits an application to the court pursuant to Sub-Section (1), the court shall carrying an inquiry into its as may be necessary and may decide that such bank or financial institution has been subjected to mandatorily liquidation.
3. The Liquidator shall publish the decision given by the court pursuant to Sub-Section (2) in each national level newspaper of the Nepali or English language at least once and while publishing in such a manner, the main points of the order of the court and the liquidation report shall have to be mentioned.
4. Upon publication of the notice pursuant to Sub-Section (3), the Liquidator shall request the Office of the Company Registrar to remove the name of the bank or financial institution from the list of registration of companies and the Office of the Company Registrar shall publish the notice of removal of the name of the bank or financial institution from the Companies Registration Book in the Nepal Gazette accordingly.
5. The process of mandatory liquidation of the bank or financial institution shall be completed after removal of the name of the bank or financial institution subjected to mandatory liquidation after publishing a notice thereof in the Nepal Gazette pursuant to Sub-Section (4) and such a bank or financial institution shall be deemed to have been duly dissolved.
6. If there is any liability of a Director, Chief Executive, office bearer, employee or shareholder of the bank or financial institution or other person under this Act or other prevailing laws, such liability shall continue to remain as it is.
97. Mandatory Liquidation of Bank or Financial Institution Carrying on Transactions in More Than One Country: The process of mandatory liquidation of a branch of a bank or financial institution carrying out transactions in more than one country shall be as determined by the Rastra Bank by giving due consideration to international practices:
Provided that, mandatory liquidation of a subsidiary company of a bank or financial institution operating in more than one country shall be dealt with according to this Chapter.
98. No claim to be entertained: A creditor or other person who fails to submit a claim within the time line given while publishing a notice for the same pursuant to Section 86 shall not be entitled to make any claim thereafter:
Provided that if a depositor has failed to make a claim over the amount of money deposited in the account, his or her rights will not be affected merely for the reason that he or she has failed to make a claim.
a. To admonish or issue a warning in writing,
b. To cause the Board of Directors to enter into a bond for taking reformative steps,
c. To issue an order in writing not to violate this Act or Rastra Bank Act or Rules, Byelaws, Directives or Order framed thereunder or to take reformative steps,
d. To prohibit to distribute dividends or issuing bonus shares to the shareholders of bank or financial institution or to prohibit to distribute dividends or issues bonus shares,
e. To specify limits on, or prohibit, accepting deposits or disbursing credits or accepting deposits or disbursing credits by the bank or financial institution,
f. To impose complete or partial ban on the transactions of the bank or financial institution.
2. The Rastra Bank may suspend or revoke a license to carry out banking or financial transactions issued to a bank or financial institution in the following circumstances:-
a. In cases where the banking and financial transactions are not initiated within six months from the date of obtaining the license for carrying out banking and financial transactions,
b. In cases where banking and financial transactions have been closed without obtaining approval from the Rastra Bank,
c. In cases where the bank or financial institution has operated banking and financial transactions in such a manner as to be against the interests of the depositors or it does not reimburse of fails to reimburse the deposited amount or amount whose maturity date has expired,
d. In cases where there is violation of or non-compliance with the Rastra Bank Act, this Act, and the Rules, Byelaws, Orders, Directives framed thereunder or the terms and conditions as fixed by the Rastra Bank,
e. If it is found that the bank or financial institution obtained the license submitting false descriptions,
f. If the deposits have not been guaranteed as per the prevailing laws.
3. If a promoter, shareholder, Director, Chief Executive, office bearer, employee or any other relevant person of a bank or financial institution violates this Act or Rastra Bank Act, or Rules, Byelaws, Directives or Orders framed thereunder, the Rastra Bank may, depending on the nature and gravity of the violation, take one or more of the following actions:-
a. To forfeit and freeze the subscribed shares of the concerned bank or financial institution and to give direction to the Board of Directors to sell the said shares to other persons,
b. To give direction the Board of Directors to freeze or suspend some or all of the facilities including meeting allowances, monthly remuneration of the Board of Directors, Director, office bearer, employee or any other relevant person of the bank or financial institution,
c. If the Chairperson, Director, Chief Executive or the person acting in the capacity of the Chief Executive or an employee is, upon an inspection or monitoring of the Rastra Bank, found that such a person has not worked in the interests of the depositors, shareholders, and license holding institution, he/she may be removed from the said position by furnishing a written notification to that effect:
Provided that while taking actions under this clause, a time limit of three to fifteen days shall be given to such a person allowing him or her to submit explanations for defense from the allegation. Such a person shall not be entitled to get any compensation or benefits as set forth in the Personnel Byelaws in lien of termination of his or her service and he/she shall be deemed to be disqualified for service in any bank or financial institution obtaining a license from the Rastra Bank for a period of five years.
d. If the director, office bearer or other employee subjected to the actions referred to in Clause (c) does not receive the letter of taking actions or does not submit an explanation after receiving the letter, the Rastra Bank may inform about the actions taken through a public notice,
e. If any bank or financial institution is found to have taken or given remuneration or other facilities contrary to this Act or in an unnatural manner, to recover all of such service facilities or the amount to be required for such facilities and the interests to be accrued thereon from the person giving such facilities,
f. To issue an order to the bank or financial institution to write to the concerned agency to take action against the Director, office bearer or employee of the bank or financial institution where he/she is professionally affiliated.
4. If it is found that any amount to be paid by a bank or financial institution resulted from recklessness or negligence of any Director, office bearer or employee, the Rastra Bank may issue an order to recover the amount from such a director, office bearer or employee.
5. The Director, office bearer or employee shall pay personally within thirty-five days from the date of receipt of the information of the order issued pursuant to Sub-Section (4).
6. If the amount payable within the time limit as referred to in Sub-Section (5) is not paid, the said amount shall be recovered as government due from any account of such a Director, office bearer or employee or from the account of any of his/her family members that has been kept at any bank or financial institution or from any movable or immovable property belonging to him or her or his or her family member.
7. If the Rastra Bank carries out regulation, inspection, supervision or any other actions of any bank or financial institution pursuant to this Section and publishes or broadcasts public notices thereof, the concerned bank or financial institution shall pay the expenses incurred in connection with publishing or broadcasting such notices.
a. Daily one hundred thousand rupees up to two weeks from the date of expiration of the time limit,
b. Daily one hundred twenty-five thousand rupees up to one month from the date of expiration of the time limit,
c. Daily one hundred fifty thousand rupees from the date of expiration of the time limit referred to in Clause (b) up to indefinite period of time.
2. If a Promoter, Director, Shareholder, Chief Executive, office bearer, employee of a bank or financial institution or any other related person violates this Act or the Rastra Bank Act or the Rules, Byelaws framed thereunder or the Directive or Order issued thereunder, or fails to implement the directive issued by the Rastra Bank pursuant to Clause (b) of Sub-Section(3) of section 99, the Rastra Bank may, depending on the nature and gravity of the violation, impose a fine not exceeding on million rupees.
3. If the bank or financial institution fails to pay the fines imposed pursuant to Sub-Section (1) within three days from the date of receipt of information of the decision, the said amount shall be recovered by deducting from the amount deposited in an account of the said bank or financial institution opened at the Rastra Bank.
4. The amount of a fine received in the form of cash by the Rastra Bank pursuant to Sub-Sections (1) and (2) shall be deposited to the Government fund.
a. Before taking the proposed action or imposing fines, the accused bank or financial institution or person shall be given a written notice of seven days to defend its/his/her position, stating the nature of the act he/she/it has committed, short description of the act, the amount that may be imposed as fines and the proposed actions.
b. The concerned bank or financial institution or person shall be required to submit his/her/its clarification in writing within seven days from the date of receipt of the written notice pursuant to Clause (a).
c. If the written clarification submitted pursuant to Clause (b) is found to be reasonable, the Rastra Bank may amend, delimit or dismiss the charge.
d. If the written clarification submitted pursuant to Clause (b) is not found to be satisfactory, the Rastra Bank may take action as referred to in Section 99 or impose a fine pursuant to as set forth in Section 100.
2. The other procedures to be complied with while taking actions or imposing fines by the Rastra Bank shall be as specified by the Rastra Bank.
2. After taking any licensee institution under its control pursuant to Sub-Section (1), the Rastra Bank may, either itself or through any appropriate person, firm, company or institution appointed by it, carry out the management of such bank or financial institution.
3. The Rastra Bank shall, within one year after the management of a licensee institution by itself or through any other person, firm, company or institution pursuant to Sub-Section (2), conduct or cause to be conducted financial and management audit of such institution and publicly publish a report thereof.
4. If the Rastra Bank is satisfied, from the report referred to in Sub-Section (3), that the concerned licensed institution has become capable of fulfilling the responsibilities required to be fulfilled by it or has reached a stage under which it has become able to operate smoothly, the Rastra Bank may take the following actions:-
a. To lift the suspension of the Board of Directors of the licensed institution made as referred to in Sub-Section (1) and handover the management of the institution again to that Board of Directors, or
b. To disolve the Board of Directors of the licensed institution which has been suspended pursuant to Sub-Section (1), and then form a new Board of Directors from among the shareholders of the licenseed institution and handover the management of that institution to a new Board of Directors, or
c. To convene the General Meeting of the licensed institution, and get a new Board of Directors formed by the Meeting, and handover the management of the institution to the Board of Directors, or
d. To take any other action as the Rastra Bank may deem appropriate.
5. If the Rastra Bank is satisfied, from the report referred to in Sub-Section (3), that the concerned licensed institution has become incapable of fulfilling the responsibilities required to be fulfilled by it or that the institution has reached a stage in which it is not able to operate smoothly, the Rastra Bank may take any of the following two actions:-
a. To initiate the process of mandatory liquidation according to the provisions made in Chapter 12 of the Act, or
b. To initiate the process of settlement according to the Rastra Bank Act.
6. The Rastra Bank shall, prior to taking a licensed institution under its control pursuant to Sub-Section (1), give an opportunity to the concerned bank or financial institution to defend itself, by providing it with a time-limit not exceeding fifteen days, depending on the situation.
7. The concerned licensed institution shall bear all expenses incurred by the Rastra Bank in connected with taking actions taken by it after taking such an institution under its control pursuant to this Section.
8. The Rastra Bank shall inform the Government of Nepal, Ministry of Finance about the action of taking of any licensed institution under its control pursuant to Sub-Section (1).
a. Carrying out banking and financial transactions without obtaining a
license,
(b) Obtaining a license for carrying out banking and financial transactions submitting wrong or false statements,
c. Carrying out banking and financial transactions against the terms and limitations of the license for carrying out banking and financial transactions,
d. Carrying out foreign currency exchange related business without a license,
e. Disbursing credits or making other investment in contravention of this Act,
f. Engaging in irregularities in the course of distributing credits, valuating mortgage, recovering credits or performing any act related thereto or creating an artificial price in the course of auctioning off of a mortgage, accepting an assets as a non-banking asset, selling a non-banking asset after it is accepted or while taking collateral.
g. Committing irregularities by any Director, office bearer, employee and other person while carrying out merger, amalgation and acquisition, liquidation, or auditing,
h. Attempting to commit an offence as referred to in Clauses (a) to (g) or abetting to the commission of such offence by any manner.
2. Except in cases where a sitting Director, office bearer, employee or any other person abetting in the commission of an offence as referred to in Sub-Section (1) proves that he/she had tried his/her best to avoid committing such an offence or that it was committed without his/her consent, the offence is deemed to have been committed by himself/herself.
3. Except in connection with regular transaction, in cases where an office bearer or employee of a branch of a foreign bank transfers the assets of such branch to another country, grants approval therefor, delegates authority to that effect, or abets the commission of such an act, it shall be deemed to be an offence committed under this Act.
liable to the following punishment:-
a. In the case of commission of the offence as referred to in Clause (a) of Sub-Section (1) of Section 103, the amount involved shall be confiscated and the offender shall be punished with a fine up to three times of the amount involved and with imprisonment for a term not exceeding five years,
b. In the case of commission of the offence referred to in Clause (b) of Sub-Section (1) of Section 103, the amount involved shall be confiscated and the offender shall be punished with a fine up to two times of the amount involved and with an imprisonment for a term not exceeding two years,
c. In the case of commission of the offence referred to in Clause (c), (d), (e), (f) or (g) of Sub-Section (1) of Section 103, the amount involved, if any, shall be confiscated and the offender shall be punished with a fine equal to the amount involved and with imprisonment for a term not exceeding one year,
d. In the case of commission of the offence referred to in Clause (h) of Sub-Section (1) of Section 103, the amount involved, if any, shall be confiscated and the offender shall be punished with a half of the punishment to be imposed on the principal offender.
2. While ascertaining the amount involved for the purpose of Sub-Section (1), the amount shall be calculated taking into account the entire amount of transaction involved.
3. While imposing fines for the offences as referred to in Clause (a) to (e) of Sub-Section (1), if the amount involved is identified, fines shall be imposed accordingly and if no such amount is identified, a fine ranging from one million to five million rupees will be imposed.
4. In case of a person committing an offence as referred to in Sub-Section (3) of Section 103, the offender shall be punished with a fine equivalent to the involved amount and with imprisonment for a term not exceeding five years.
5. In cases where an offence as referred to in Section 103 has been committed by any firm, company or institution, punishment according to this Section shall be imposed on the concerned Director, office bearer, employee or concerned person of the concerned firm, company, or institution and if such a concerned person could not be ascertained, punishment shall be imposed on the chief of the firm, company, or institution, as the case may be.
6. If anyone is found to have committed any offence as referred to in Section 103 and the proceeds of the offence is found to have been kept or concealed in the name of himself/herself, any family member or relative or in the name of anyone else, such property and the property accrued therefrom shall also be confiscated.
Provided that while filing an appeal against an action taken pursuant to Section 99 or punishment imposed pursuant to Section 100 on a bank or financial institution by any shareholder, it has to be filed by a representative of the shareholders representing at least twenty-five percent of the paid up capital of the bank or financial institution.
2. If any Director, office bearer, employee or any other person wishes to file an appeal pursuant to Sub-Section (1) against an actions taken or a fine imposed on him or her on a personal basis, fifty percent of the amount of such fines or any amount as mentioned in the order as payable should be deposited.
3. A director, office bearer or employee of any bank or financial institution who is removed or dismissed from his position shall not be eligible to become a director, office bearer or employee of any other bank or financial institution until a period of five years is expired from the date of such actions taken or until, if he or she has filed an appeal at the court, until the exoneration by the court.
107. Special Provisions Relating to Infrastructure Development Bank: (1) The Rastra Bank may formulate a separate special policy or issue directives accordingly concerning the establishment, operation, regulation, supervision, merger and acquisitions or liquidation of Infrastructure Development Banks based on the nature, volume and investment made in respective Infrastructure Development Banks.
2. Notwithstanding anything contained elsewhere in this Act, the maximum limit of shares to be subscribed by a promoter or shareholder of an Infrastructure Development Bank or limit of equity investment to be made by any foreign bank, financial institution and other corporate body in shares, debentures or other financial instruments shall be as determined by the Rastra Bank from time to time.
108. Security of Deposits to be made: A licensed bank and financial institution shall be required to make security of the amount remained in deposit account in accordance with the provisions of the prevailing law as specified by the Rastra Bank.
109. Banking Secrecy to be Maintained: (1) The relationship between a bank or financial institution and its customers and information pertaining to his or her accounts, records, books, ledgers and statements shall not be disclosed to any person other than the concerned person.
2. Notwithstanding anything contained in Sub-Section (1), secrecy shall not be deemed to have been violated, if the details or information of any person remained in a bank or financial institution is provided in following manner: –
a. If the details or information provided to the Rastra Bank pursuant to this Act or Rastra Bank Act or the Rules or Byelaws framed thereunder or the orders or directives issued thereunder or if the details or information is shared between banks or financial institutions in the course of exchanging credit information,
b. If the details or information is provided to the court in connection with any litigation or any other legal action,
c. If such notice or information is provided to any Committee of Inquiry carrying out investigations or prosecution, or inquiry according to the prevailing laws or to any other competent person authorized by the prevailing laws, or such information is provided to any regulatory entity.
d. If any detail or information is provided to an auditor in the course of auditing,
e. If any detail or information is provided to a foreign country in accordance with the prevailing laws relating to mutual legal assistance,
f. If, in the course of investigation of any case of a specific nature, the Government of Nepal, Ministry of Finance, has made a request, accompanied by the reason therefor, for providing any details of the account of any person, firm, company or institution maintained with the bank or financial institution, and if the Rastra Bank has given direction according for the same.
3. No one shall disclose or cause to be disclosed any information or details received under Sub – Section (2) to any unauthorized person.
4. Except in the circumstance as referred in Sub-Section (2), the Director, Chief Executive, office bearer, employee, auditor, advisor of a bank or financial institution or any other relevant person shall not disclose or cause to be disclosed the secrecy of the accounts, records, books, ledgers and any other information of the bank or financial institution the secrecy of which is required to be maintained in such a manner as to undermine the relationship between the bank or financial institution and its customers.
110. Power to Give Directive to Freeze Accounts: (1) The Rastra Bank may, in the following circumstances, give directive to a bank or financial institution at any time to freeze any account not allowing any type of payment to be made to or transfer of fund in the name of, any person, firm, company or institution:-
a. In cases where a request has been made by a competent authority to the Rastra Bank in the course of investigation of any offence,
b. In order to maintain national interests by preventing money laundering and financing in terrorism and prevention of corruption, organized crime or controlling commission of possible offence in the transaction of bank and financial institution.
2. It shall be the duty of the concerned bank or financial institution to comply with the directive given by the Rastra Bank pursuant to Sub-Section (1).
111. Right to Make Claims over the Deposits: (1) No claims of any person other than the actual depositors over the deposits made with a licensed bank or institution shall be entertained.
2. In the event of the death of a depositor, a nominee appointed by him/ her, if any, and if such nominee also dies or if no nominee has been appointed by the depositor, the surviving person from amongst his/her relatives, in the following order of priority, shall have right to such deposits in the first place: –
a. The husband or wife living in the joint family,
b. The son or daughter, or adopted son or adopted daughter or widow daughter-in-law, living in the joint family,
c. The father, mother, grandson or granddaughter living in the joint family,
d. The husband or wife, son, daughter, father or mother, son, daughter-in-law or married daughter living separately,
e. The grandfather, grandmother, brother, nephew, niece, sister living in the joint family, the grandfather or grandmother living separately,
f. The step mother living in the joint family, and grandson and unmarried granddaughter of the son living separately,
g. The elder or younger brother living separately and nephew, niece, sister, nephew, niece
h. The uncle, widowed aunt, sister-in-law (elder or younger brother’s wife), or grand-daughter-in-law living in the joint family,
i. Married sisters, grand-daughter-in-law living separately.
(3) If there is no one in the order of priority as referred to in Sub-Section (2), and as such a situation has arises where a rightful successor according to the prevailing laws has not made any claim over the deposit, the deposit(s) shall be deposited in the Banking Development Fund of the Rastra Bank and be used for banking development.
4. Notwithstanding anything contained in the prevailing laws, no amount deposited with a bank or financial institution shall be handed over to anyone without the approval of the person who has the title thereto under Sub-Section (1).
112. Statement of Unclaimed Deposits: (1) A bank or financial institution shall, within the first month of each fiscal year, submit to the Rastra Bank statements of any deposit accounts which have remained dormant for the last ten years, and of those which have not been claimed under this Act.
2. A bank or financial institution shall publish a notice to collect the unclaimed deposits as referred to in Sub-Section (1) once in every five years in a national level daily newspaper. Details description thereof shall also be posted by the bank or financial institution on its website.
3. In cases where the amount as referred to in Sub-Section (1) is not collected within a period of twenty years, such deposit shall be collected to the Banking Development Fund of the Rastra Bank and be used for banking development.
113. Recovery from or confiscation of deposits: In cases where any credit has been distributed or transaction has been carried out by pledging as collateral or security the amount deposited with a bank or financial institution, or if amounts are deposited with a bank or financial institution with misappropriated funds belonging to the Governmental of Nepal or any entity owned by the Government of Nepal, or with funds obtained by committing any act which is deemed to be an offense under the prevailing laws, or with funds collected by carrying out any activity relating to terrorism or committing banking or financial offence or organized crime, such deposits may be confiscated or such collateral or security or misappropriated or other funds may be recovered from such deposits or such deposit may be confiscated in accordance with the prevailing laws.
114. Recovery from Director: If any Director is found to have taken any cash or kind for personal benefit in the course of transaction of a bank or financial institution, the bank or financial institution shall recover such cash or kind from such a Director.
115. Prohibition on Making Claims: If any person is found to have entered into any transaction with any Director or with his/her representative knowingly or having adequate reasons to believe that the Director has entered into the transaction for his/her personal interests or inflicting loss to a bank or financial institution, such a person may not make a claim against the bank or financial institution with regard to such transaction.
116. Government of Nepal to be a Plaintiff: (1) A case relating to offenses as referred to in Section 103 shall be filed with the Government of Nepal being the plaintiff, and such a case shall be deemed to have been included in Schedule 1 of the Government Cases Act in force.
2. Anyone may file a complaint in writing or verbally against any Director, office bearer, employee, borrower or any other person committing an offence referred to in Section 103 along with evidence thereof at the nearby police office. While filing such a complaint, it shall not be required to mention the name of the person filing the complaint.
3. The Rastra Bank shall extend the necessary cooperation in all acts such as inquiry of investigation, prosecution of the offences as referred to in Section 103.
117. Provisions Relating to Transparency: (1) A bank or financial institution or a branch of a foreign bank or financial institution shall be required to publish a periodic report on its financial position and status of risks in every three months for transparency of the transactions it has carried out.
2. The minimum matters to be included in the report as referred to in Sub-Section (1) shall be as specified by the Rastra Bank.
118. Provisions Relating to Protection of Customers’ Interests: The Rastra Bank may carry out the following functions for the purpose of protection of the interests of consumers:-
a. To ensure that a licensed bank or financial institution has been carrying out its financial transactions as per the prevailing laws and that they have been making available financial services to the consumers in a transparent and fair manner,
b. To make coordination on matters of protection of the interests of customers in the financial sector,
c. To collect the necessary information to introduce reform in matters of the protection of interests of consumers in the banking sector and to bring about financial literacy.
119. Exemption and facilities: (1) Any mortgage deed of movable or immovable assets to be concluded for credit not exceeding one million rupees supplied by a bank or financial institution to any citizen of Nepal or any institution established in accordance with the laws in force for agriculture, cottage and small-scale industry, irrigation, hydro-power generation and for any other enterprise as specified by the Government of Nepal shall not be required to make registration of such deed.
2. The maturity period of the credit and deposits shall be as fixed by the bank or financial institution.
3. No revenue stamp fee shall be charged on any kind of deeds or documents related with the bank or financial institution.
120. Expenditures Management: The Rastra Bank may issue the necessary directives with regard to preliminary, incorporation, administrative, commercial and managerial expenditure as well as other expenditures of a bank or financial institution.
121. Statement of Assets to be submitted: The Directors, office bearer and the Chief Executive of a bank or financial institution shall be required to submit a statement of the entire movable and immovable assets and liabilities in his/her name and in name of his/her family members within sixty days from the date of completion of every fiscal year to the concerned Bank and information thereof shall be given also to the Rastra Bank. While submitting such a statement, the source of such income shall also be mentioned.
122. Credit, Liabilities and Titles against the Collateral of Credit may be purchased or sold: Notwithstanding anything contained in be prevailing laws of Nepal and unless otherwise provided for in the agreement concerning credit, the title over the credit given by any bank or financial institution to any person or of the liability it has accepted and of the movable or immovable assets pledged as collateral may also be purchased or sold.
123. Settlement of Disputes: (1) In case of any dispute arising between banks or financial institutions, such a dispute shall be required to be settled in mutual consent.
2. In cases where a dispute could not be settled through mutual consent in accordance with Sub-Section (1), the Rastra Bank shall settle the dispute through mediation or other methods of disputes resolution under the prevailing laws.
(3) The decision made by the Rastra Bank pursuant to Sub-Section (2) shall be final.
124. Not to be liable for acts done in good faith: (1) The office bearer or employee of the Rastra Bank or of a bank or financial institution shall not be held individually or severally liable for any act carried out in good faith under this Act or the Rastra Bank Act or the Rules or Byelaws framed thereunder or the orders or directives issued thereunder.
2. If any kind of lawsuit is filed against the Rastra Bank, a bank or financial institution or an office bearer thereof in relation to any loss or damage caused or likely to be caused by any act carried out or supposed to be carried out in good faith in connection with the compliance with this Act or Rastra Bank Act or the Rules or Byelaws framed thereunder or the orders or directives issued thereunder, the concerned institution shall bear the expenses of such lawsuit:
Provided that if an act is committed out of enmity, negligence or malafide intention, the concerned person shall be liable and the Rastra Bank or a bank or finance institution shall not bear the expenses to be incurred on such matter.
125. Actions Taken not to be Invalid: No action taken by a Director or Board of Directors shall be void merely on the ground that any irregularity in appointment of the Director of a bank or financial institution or in formation of any committee had taken place or the position of a Director had fallen vacant.
126. Study Committee and Sub-committee may be formed: (1) The Rastra Bank may, in order to carry out overall study on the reform of banking and financial laws, credit recovery, stability of the financial sector, and timely reforms on the financial system and to submit a report, thereon, constitute an expert study committee comprising representatives and experts of the Rastra Bank, bank or financial institutions and concerned entities.
2. The Rastra Bank may, for the purpose of Sub-Section (1) constitute sub-committees as may be necessary.
3. The functions, duties, and facilities of the Study Committee as referred to in Sub-Section (1) or of the sub-committee as referred to in Sub-Section (2) shall be as specified by the Rastra Bank.
127. Taking Oath of Office: (1) Each Director, office bearer, Chief Executive or employee of a bank or financial institution shall, prior to assuming the duties of his or her office, take the oath of office and secrecy according to the format as referred to in the schedule.
2. The oath of office referred to in Sub-Section (1) shall be administered by the Rastra Bank to the Chairperson, by the Chairperson to other Directors and the Chief Executive and by the Chief Executive or official designated by him/her to other official and employees.
128. Amendment of Memorandum of Association and Articles of Association: Notwithstanding anything contained in prevailing laws, amendment to the Memorandum of Association and Articles of Association of a bank or financial institution shall not be effective unless approved by the Rastra Bank.
129. This Act to Prevailed: (1) Matters as referred to this Act or the Rules, Byelaws, working procedures or Orders or Directives issued under this Act, it shall be dealt with in accordance with such provisions and in other matters, it shall be dealt with according to the Rastra Bank Act and other prevailing laws.
2. Matters Relating to the regulation, inspection and supervision and settlement of a claim of the bank or financial institutions established under this Act shall be under the Rastra Bank Act.
130. Power to Remove Difficulties: (1) If any difficulty arises in connection with the enforcement of any provision of this Act, the Rastra Bank may, with the approval of the Government of Nepal, issue necessary orders to remove such difficulty.
2. While issuing an order for removing difficulty pursuant to Sub-Section (1), reasons and justification thereof shall also be specified.
131. Power to issue Order or Direction: The Rastra Bank may, subject to this Act or the Rules or Byelaws framed thereunder, issue an order or directive to a bank or financial institution as may be necessary.
132. Power to frame Rules, Byelaws: (1) The Rastra Bank may, in order to implement this Act, if it deems necessary, frame and enforce necessary Rules of Byelaws.
2. The Rules framed by the Rastra Bank pursuant to Sub-Section (1) shall commence only after approval by Government of Nepal.
133. Power to Frame Byelaws and Working Procedures: (1) The Board of Directors may, in order to carry out its institutional, administrative and business transactions in a systematic manner, with the approval of Nepal Rastra Bank, frame byelaws relating to any or all of the following matters subject to this Act and the terms and conditions, limitations and norms as prescribed by the Rastra Bank:-
a. On appointment, promotion, transfer, dismissal, remuneration, allowances, gratuity, pension, leave, code of conduct, discipline, and the terms and conditions of service and the formation of such a service,
b. On financial administration of the bank or financial institution,
c. On writing off of credits,
d. On other matters as prescribed by the Rastra Bank from time to time.
2. In addition to the matters referred to in Sub-Section (1), a bank or financial institution may frame working procedures on the following matters as may be necessary:-
a. On meeting of the Board of Directors and working procedures of the General Meeting,
b. On delegation of authority by the Board of Directors to any Director, Chief Executive, Office bearer or employee,
c. On the terms and conditions of a contract to be concluded on behalf of a bank or financial institution,
d. On procedures relating to the use of the seal of a bank or financial institutions,
e. On valuation of non-banking assets to be mortgaged at the time of disbursement of credits or at the time of auction,
f. On other business to be carried out by a bank or financial institution as per this Act,
g. On declassifying documents and papers,
h. On other matters as specified by the Rastra Bank, from time to time.
134. Repeal and Saving: (1) The Banks and Financial Institutions Act, 2063 (2006) is hereby repealed.
2. Acts carried out and actions taken according to the Act repealed pursuant to Sub-Section (1) shall be deemed to have been taken under this Act.
(Relating to Sub-Section (1) of Section 127)
Format of Oath of Office
I, …………………solemnly and sincerely affirm that as I have been appointed/nominated/elected to the office of …………………… of the …………………………. bank or financial institution, I shall perform the duties of my office paying attention forever to the promotion of financial system and interests of the bank or financial institution with honesty subject to the prevailing laws, Rules and policies, regulation and directives of the Rastra Bank. I shall not disclose the transactions and matters of the bank or financial institution to be kept confidential. I also do solemnly affirm with honesty and truth that I shall not disclose any information or matter that come to my knowledge as in the capacity of ………………………… at any time regardless of whether I remain in office or not, directly or indirectly, except in cases where authorized by the Board of Directors and compelled by law.
The person taking the oath of office The person administering the oath of office
Name: Name:
Designation: Designation:
Signature: Signature:
Date: Date:
Date of authentication:
2075/06/02 (18 September 2018)
Act Number 23 of the year 2075 (2018)
An Act Made for Amendment and Consolidation of the Laws Relating to Children
Preamble:
Whereas, it is expedient to make amendment and consolidation of the laws relating to children in order to maintain the best interests of the children, by respecting, protecting, promoting and fulfilling the rights of the child.
Now, therefore, be it enacted by the Federal Parliament.
(2) It shall come into force immediately
(a) “Orphan children” means orphan children as referred to in the prevailing laws.
(b) “Investigating authority” means an official having authority under the prevailing laws to investigate into the offence.
(c) “Offence” means a criminal offence as provided by the prevailing laws.
(d) “Children in conflict with law” means the children accused of committing an offence, and this term also includes the children convicted by the Juvenile Court for committing an offence.
(e) “Prescribed” or “as prescribed” means prescribed or as prescribed in the Rules framed under this Act.
(f) “Diversion” means the act of bringing the child accused of committing an offence outside the ambit of the formal judicial proceedings by adopting any of the processes mentioned in Section 29.
(g) “Observation chamber” means an observation chamber established pursuant to Section 22.
(h) “Family” means a child’s father, mother, elder brother, younger brother, elder sister, younger sister, grand-father or grand-mother living in an undivided family and this term also includes other relative living in the undivided family.
(i) “Council” means the National Child Rights Council referred to in Section 59.
(j) “Children” means persons who have not completed the age of eighteen years.
(k) “Violence against children” means an act referred to in sub-section (2) of Section 66.
(l) “Juvenile Court” means a juvenile court constituted in accordance with sub-section (1) of Section 30 and this term also includes the juvenile bench constituted pursuant to sub-section (3) of the said Section.
(m) “Child pornography” means an act to take or make video or picture of children showing their sex organ or making them involve in imaginary sexual activities, to demonstrate vulgar picture through newspaper, poster, print, movie or other medium of communication, and this term also includes activities of production, sale, import, export, collection or dissemination of such materials.
(n) “Child welfare authority” means an official appointed or prescribed pursuant to Section 61.
(o) “Child home” means a child home established pursuant to Section 52.
(p) “Child sexual harassment/abuse” means an act referred to in sub-section (3) of Section 66.
(q) “Child reform home” means a child reform home established pursuant to Section 43.
(r) “Ministry” means the Ministry of Women, Children and Senior Citizens of the Government of Nepal.
(s) “Children in need of special protection” means the children referred to in Section 48.
(t) “Guardian” means a person or institution appointed or having an obligation to protect the rights and interests of the child in accordance with this Act or the prevailing laws, and this term also includes a curator in the absence of the guardian.
(u) “Social service provider” means a person referred to in Section 62.
(v) “Local Level” means any Rural Municipality or Municipality.
(2) The Government of Nepal, Province Government and Local Level shall take necessary measures required for preventive and security service including prevention of possible accidents, minimization of risks that may occur on the children, in order to protect the rights of the child to live and development.
(2) The father or mother of a child, after his or her birth, shall give a name to him or her and register it according to the prevailing laws.
(3) The mother of a child born from rape or incest that is punishable by the prevailing laws shall register his or her birth by mentioning only the name of the mother if she so wishes.
(4) While giving name pursuant to sub-section (2), if the father or mother of a child is not available immediately or there is no possibility that they can be available, then the child may have the name given by any other family member or guardian who looks after him or her.
(5) Every child after birth may use the surname given by mutual consent of his or her parents or if such consent is not available he or she may use the surname of his or her father after his or her name.
(6) Notwithstanding anything contained in sub-section (5), the child, if he or she so wishes, may use the surname of his or her father or mother or both.
(7) A child whose paternal identity is not known may use his or her mother’s surname after his or her name.
(8) If a dispute arises regarding the surname of any child, except as proved otherwise, it shall be deemed that the child is using his or her father’s surname.
(9) A child whose both father and mother are not identified may use the surname given by the guardian after his or her name.
(10) The child welfare authority shall be informed about it when the guardian gives the name and surname pursuant to sub-section (9).
(11) If the name of father, mother and grand-father, grand-mother must be mentioned pursuant to law in any formal legal proceeding or document, in cases where the father of the child is not known, he or she may mention his or her mother and parents’ name and if the name of mother is also not known, mentioning that matter will suffice the requirement.
(12) The mother, father or guardian of a child shall not change his or her name, surname that hides the identity of the child with an intention to gain undue benefits.
(2) No one shall discriminate between son and daughter, son and son or daughter and daughter or children from ex-husband or wife or present husband or wife in maintenance, education or health care of children.
(3) No one shall make any kind of discrimination between their own son, daughter and adopted son, daughter.
(4) No discrimination shall be made with regard to maintenance, education and health care between children born to a man and woman before and after their marriage.
(2) Notwithstanding anything contained in sub-section (1), the Juvenile Court may issue an order to separate any child from his or her father or mother and entrust him or her to any guardian’s custody for the best interests of the child, if necessary.
Provided that the concerned party shall not be deprived of an opportunity to submit his or her explanation before issuing such an order.
(3) Except for the condition where the Juvenile Court has made a restriction stating that it would be not in the interests of a child, the child living separately from the father or mother or both shall have the right to make direct contact or meet with the father or mother regularly.
(4) The person adopting a child shall allow the adopted child to meet, contact and make correspondence with his or her biological parents.
(5) Any person or institution responsible for alternate care shall allow the children under their care or guardianship to meet their biological parents or families.
(2) The parents shall have equal responsibility in relation to care, protection and maintenance of their children. In cases where the parents are divorced or living separately due to any other reasons, financial expenses for the maintenance of their children shall be borne by both parents according to their capacity.
(3) No father, mother, other member of the family or guardian shall abandon or leave the child of their own or under his or her guardianship unattended.
(4) Children with disabilities, war victims, displaced, under vulnerable conditions, or living on street shall have the right to special protection as prescribed from the State for their secured future.
(5) Every child shall have the right to protection against any type of physical or mental violence and torture, hatred, inhuman treatment, gender or untouchability-based mistreatment, sexual harassment and exploitation that might be caused by his or her father, mother, other family member or guardian, teacher and other person.
(6) Every child shall have the right to protection from being exploited economically and shall also be entitled to be protected from any activity which may be harmful to him or her or be obstacle to his or her education or detrimental to his or her health, physical, mental, moral, social development.
(7) No child shall be deployed in army, police and armed group and be used for armed conflict or political purpose directly or indirectly.
(8) No one shall attack, or make hindrance to the operation and management of any school, including the place, service or facility, used for the best interests of children, with any excuse at times of armed conflict or in any adverse situation of whatever type.
(9) Children below fourteen years of age shall not be deployed in any risky work or used as a house-servant or house-maid.
(10) The Government of Nepal, Provincial Government and Local Level may follow the necessary measures and make and implement the standards for the protection of the children.
(2) Every child shall have the right to demand and receive information on the subject of his or her right, interest and concern subject to the prevailing laws.
(2) The provisions regarding the opening of a child club or organization pursuant to sub-section (1) shall be as prescribed.
(2) No one shall do, or cause to be done the act of creation of personal information, details, photo, collection of information, publishing, printing, demonstrating, sale and distributing or transmitting by any means that causes negative impact on the characteristics of a child or any shame, regret or domination to him or her.
(3) The details that provide the identity of a child along with the name, surname, address, age, sex, family background, economic status, offence committed by, and any details regarding action, if any taken, against a child who is victim or accused of an offence by the Juvenile Court, police office, guardian, caretaker, or any other body shall be kept confidential. The details of a child kept confidential shall not be used elsewhere except as provided by the law.
Provided that if such details have to be published for any study or research work, only the age or sex of the child, without disclosing his or her name, surname, address, other data which may reveal his or her identity and his or her family may be published.
(2) Every child with disability shall have the right to determine his or her own honour and prestige, to promote his or her own independency, to participate actively in the society and to live a life with dignity.
(3) Every child with disability shall have the right to obtain special care and to be assimilated in the society and to obtain the opportunity to education, training, health care, rehabilitation service, preparation for employment and entertainment for the development of his or her personality.
(4) Every child with disability shall have the right to equal access and utilize the public services and facilities.
(2) Pregnant women and children shall have the right to get necessary vaccination to prevent diseases and allow to utilize the physical and mental health services according to the national standards, to get information about body, reproduction and reproductive health according to age and maturity.
(3) Every child shall have the right to obtain free basic health service.
(2) Every school shall encourage the children to participate in sports at the time other than study and for that purpose, provide for necessary playgrounds and sports materials.
(3) Every child shall have the right to child friendly entertainment according to his or her age, interest and requirement.
(4) Every child shall have the right to take part in cultural activities according to his or her religion, culture, custom, tradition and conscience without causing any adverse effect on his or her interests.
(2) Every child shall have the right to acquire free and compulsory education upto the basic level and free education upto the secondary level pursuant to the prevailing law in a child friendly environment.
(3) Every child shall have the right to acquire education through proper study materials and teaching method according to his or her special physical and mental condition, pursuant to the prevailing law.
(4) Dalit children shall have the right to acquire free education with scholarship pursuant to the prevailing law.
(2) It shall be the responsibility of everyone to instantly help children whose life is in risk.
(3) The child welfare authority or Juvenile Court shall, while making arrangement for a child’s alternative care, separating a child from his or her parents or guardian, making decision on who has to take care of and maintain a child after divorce between his or her father and mother shall adopt the process as prescribed for the best interests of the child pursuant to this Act.
(4) Public and private social institutions where children stay or which provide services to children shall, while constructing or refurbishing the physical structures, make necessary arrangement that is child friendly.
(2) It shall be the responsibility of every father, mother, other members of the family or guardian to care, maintain and protect, to provide the opportunity for education, treatment, along with personality development of, to provide environment full of love and care and to guide properly for future certainty of the child.
(3) Father, mother, other family member or guardian shall provide suitable environment for acquiring education to every child of age to join school by admitting him or her to the school.
(4) Father, mother, other member of the family or guardian shall not engage the child on labour which may adversely affect his or her education, health and physical or mental development.
(5) Father, mother, other member of the family or guardian shall not leave the child below six years of age alone at home or any other place or send alone elsewhere, without being accompanied by an adult person.
(a) To take opinion of a child before making a decision that affects him or her,
(b) To provide an opportunity to father, mother, other family member or guardian to put their opinion before making decision on the subject matter associated with the interests and benefits of the child,
(c) To use parlance, speak and behave according to the child’s age, level of intellectual development, conscience and cultural norms and values,
(d) To use language preferred by the child and to take assistance of an interpreter as required while talking to him or her.
(2) If it appears that it is no longer required to take a child under control, who has been taken under control, pursuant to sub-section (1), he or she shall be handed over to his or her family member or guardian or the nearest relative.
(3) If a child is taken under control pursuant to sub-section (1), the investigating authority shall give information about it to his or her family member, or guardian or close relative.
(4) The investigating authority shall not use force while taking a child under control pursuant to sub-section (1).
Provided that it shall not bar the using of minimum force required to take the child under control.
(5) The child taken under control pursuant to sub-section (1) shall, if possible, be referred to a child psychologist or a person working in the field of children’s welfare in order to provide the required counselling service.
(6) If the child taken under control pursuant to sub-section (1) could deviate himself or herself pursuant to Section 27, the investigating authority may, notwithstanding anything contained in the prevailing law, take the deposition of him or her by himself or herself.
(7) The child taken under control pursuant to sub-section (1) may be kept in an observation chamber with the permission of the Juvenile Court for a maximum twenty-one days, not exceeding five days at a time.
(8) Notwithstanding anything contained in sub-section (7), if the Juvenile Court is of the opinion that it not reasonable to keep the child accused of offence in the observation chamber, having regard to the child’s physical condition, age, circumstances at the time of commission of the offence or condition of the observation chamber, the Juvenile Court may make an order to investigate the case by entrusting such a child to his or her father, mother, other family member or guardian and in their absence to any social organization working in the field of protection of the rights and interests of the child or child reform home on the condition that the child shall make presence when the Juvenile Court so requires.
(9) While inquiring into the child taken under control, the investigating authority shall make it in the presence of his or her father, mother or guardian or children welfare authority or legal practitioner in a child friendly environment.
(2) A separate room shall be arranged in every District Police Office until the observation room referred to in sub-section (1) is established.
(3) The child taken under control for investigation shall be provided with counselling by a child psychologist and psycho-social support as required.
(4) If any member of a child’s family wishes to stay together with the child who is kept in the observation chamber for assistance, the investigating authority may give permission to stay together specifying the time and conditions as required.
(5) The provisions relating to the establishment, operation, management and monitoring of the observation chamber shall be as prescribed.
(2) The Government of Nepal may designate an official working at the District Police Office, who has got training on juvenile justice, to perform that function until the separate unit is formed pursuant to sub-section (1).
(2) Notwithstanding anything contained in sub-section (1), the Juvenile Court may, for reasons to be recorded, send a child accused of an offence to the child reform home during trial, in any of the following circumstances:
(a) If there is adequate ground that the child’s life would be in danger, someone would get hurt from him or her, such a child would go away or any other reason that it is not appropriate to put him or her elsewhere,
(b) If it appears from the evidence available for the time being that a child accused of an offence punishable by imprisonment for a term not exceeding three years or more or there is a reasonable ground to believe that he or she is an offender.
(3) Except in the circumstance referred to in sub-section (2), other child accused of offence may be entrusted to his or her father, mother, other family member or guardian, and in their absence to an institution or person working for the welfare of the children on a condition that the child will be presented as and when needed.
Provided that if the Juvenile Court deems that it is not appropriate to keep the child in the reform home, taking into account the child’s physical condition, age, circumstances at the time of commission of the offence as mentioned in sub-section (2), it shall not bar the entrusting of such a child to his or her father, mother, other family member or guardian, and in their absence, to an institution or person protecting the rights and interests of the child, by specifying the conditions pursuant to this sub-section.
(4) While entrusting a responsibility of a child pursuant to sub-section (3), that person and the child shall be informed about the specified conditions and the consequences that must be borne if they have not been followed.
(5) If the child who is entrusted to someone pursuant to sub-section (3) does not follow the conditions specified by the juvenile court, the trial of the case may be made by keeping him or her in the child reform home.
(a) To get information on the language he or she understands,
(b) To participate or be involved,
(c) To keep the details of personal identification confidential,
(d) To get recovery of the reasonable compensation from the offender,
Provided that this clause shall not be considered as limiting the opportunity of the victim to receive compensation from the State.
(e) To get free legal aid and socio-psychological counselling service as required and to appoint a separate legal counsel if he or she so wishes,
(f) To get free service of the translator, sign language expert or interpreter if the victim does not understand the language used by the investigating authority or Juvenile Court,
(g) To get, free of cost, the copy of the documents including the decisions and orders made by the investigating authority or Juvenile Court,
(h) To get police protection for safety against the probable threat that may be caused from the offender or his or her party,
(i) To have his or her case heard in camera,
(j) To have the indirect presence of the defendant in the course of hearing of the case as required.
(a) Right to obtain information on the charge made against him or her, its proceeding, order issued or decision made on it directly or through his or her family or guardian,
(b) Right to receive free legal aid and other necessary support immediately in order to defend against the charge made against him or her,
(c) Right to have the case tried and settled by the competent judicial authority,
(d) Right to demand the presence of family or guardian required in all processes of juvenile justice delivery,
(e) Right to receive prompt and fair justice from the Juvenile Court,
(f) Right to have confidentiality in the process of juvenile justice delivery
(g) Right to get information on the constitutional or legal rights,
(h) Right to have investigation, prosecution and hearing in the child friendly environment,
Explanation: For the purposes of this clause, “child friendly environment” means the treatment done with the child that is commensurate to the age, maturity and psychology of the child, this term also includes the use of the language understood by the child, creation of the fearless atmosphere, presence of his or her mother, father or other family member or guardian, addressing the personal needs of the child and the availability of the facilitator as required.
(i) Right to have an opportunity to participate in every stage of judicial proceedings and to put his or her own views independently,
(j) Right to allow the participation of the parents, guardian of the child, during the hearing of the case, if he or she so wishes,
(k) Right to stay separately from the offender, if the child so wishes where the father, mother, parents or guardian of the victim child is the perpetrator.
(2) The child accused of an offence shall be presumed to be innocent unless decided otherwise by the Juvenile Court, and such child shall not be compelled to give testimony against him or herself.
(a) The investigating authority, where the claimed amount is upto five thousand rupees or the offence t is punishable by a fine of upto two thousand rupees or imprisonment for a term of upto two months,
(b) The government attorney, where the claimed amount is upto ten thousand rupees or the offence is punishable by a fine of upto five thousand rupees or imprisonment for a term of upto three years,
(c) The Juvenile Court, irrespective of the claimed amount or the amount of fine or term of imprisonment.
(2) Notwithstanding anything contained in clause (c) of sub-section (1), a child shall not be diverted in a case punishable by imprisonment for a term of three years or more than three years shall not be diverted.
(3) The child or guardian may, if not satisfied with the order of diversion, file a petition in the Juvenile Court in the case of clauses (a) and (b) of sub-section (1) and in the High Court in the case of clause (c).
(a) Confession of offence by the child,
(b) Consent of the concerned child, his or her father, mother and other family member, or guardian where there are no parents,
(c) Receipt of consent of the victim ensuring the rehabilitation of the victim party to the extent of possible,
(d) Nature of the offence and circumstances of its commission, gravity of the event, age, maturity and intellectual level, family environment of the child and the damage caused to the victim and his or her rehabilitation are to be considered.
(a) To have reconciliation or understanding between the child and the victim,
(b) To make the child realize the mistake,
(c) To provide necessary counselling to the child and his or her family,
(d) To send the child to any community service,
(e) To send the child to any institution for his care and protection,
(f) To release the child on supervision and direction of the child welfare authority,
(g) To entrust the child to his or her father, mother or other family member or guardian,
(h) To make the child participate in any training or educational program.
(2) While diverting a child by adopting any procedure referred to in clauses (d), (e), (f), (g) and (h) of sub-section (1), the period shall also be fixed.
(3) While diverting a child by adopting the procedure referred to in clauses (d), (e), and (f) of sub-section (1), no diversion shall be made so that it exceeds the maximum term of punishment imposable for the commission of the offence.
(4) The investigating authority or government attorney shall, before diverting a child, obtain a report on study and analysis of physical and mental condition of the child by the child psychologist and child expert and economic, cultural condition and circumstances of the child by the social worker.
(5) The investigating authority, government attorney or Juvenile Court shall give the information about the diversion of the child pursuant to sub-section (1) to their respective higher office and Juvenile Court.
(6) If the child accused of an offence is diverted, such a dispute shall terminate, and its formal judicial proceeding shall be deemed to be concluded.
(7) The investigating authority, government attorney or Juvenile Court that has made diversion shall make arrangement to monitor, whether the diverted child has been continuously participating in the diversion procedure or not, through a probation officer.
(8) The following may be done to indemnify the damage caused to the victim while diverting a child:
(a) To compensate the victim or to have recovery of the actual loss and damage,
(b) To cause the property, profit or material acquired from the offence to be returned to the concerned owner,
(9) Other provisions relating to the diversion shall be as prescribed.
(2) The notice of formation of the Juvenile Courts pursuant to sub-section (1) shall be published in the Nepal Gazette, and the territorial jurisdiction and venue of such Courts shall be as mentioned in the same notice.
(3) A juvenile bench shall be formed in each District Court for the proceeding, hearing and settlement of the offence to be dealt with the juvenile court until the Juvenile Court is formed under sub-section (1).
(4) The juvenile bench referred to in sub-section (1) shall consist of the following members:
(a) District Judge,
(b) Social service provider,
(c) Child psychologist or child specialist.
(5) The qualification, appointment, remuneration and other conditions of service of the social service provider, child psychologist or child specialist referred to in clauses (b) and (c) of sub-section (4) shall be as prescribed.
(6) Notwithstanding anything contained in sub-section (1), if an adult person is involved, along with the child, in any offence, the matter shall be proceeded, tried and settled by the Juvenile Court in the case of the child, and the matter shall be proceeded, tried and settled pursuant to the prevailing laws in the case of the adult person by establishing a separate case file.
(2) The Juvenile Court shall make the child participate while trying the case and shall provide an opportunity to freely put his or her views.
(2) During the trial and adjudication of the case in-camera pursuant to sub-section (1), only the concerned child, his or her family member or guardian, victim, government attorney, concerned legal practitioner and the person permitted by the Juvenile Court may enter into the in-camera bench.
(3) The procedures of the in-camera bench shall be as prescribed.
(2) If a child of ten years of age or above but below fourteen years of age commits an offence that is punishable by a fine, the child shall be released after counseling him or her and if such a child commits an offence that is punishable by imprisonment, the child shall be punished with imprisonment for upto six months or be sent to the child reform home for a period not exceeding one year without subjecting him or her to imprisonment.
(3) If a child of fourteen years of age or above but below sixteen years of age commits an offence, the child shall be punished with half the punishment that is imposable on the person having attained majority pursuant to the prevailing law.
(4) If a child of sixteen years of age or above but below eighteen years of age commits an offence, the child shall be punished with two-thirds of the punishment that is imposable on the person of legal age pursuant to the prevailing law.
(5) The Juvenile Court shall, having regard, inter alia, to the age, sex, maturity of the child who is held to be subject to punishment pursuant to sub-section (2), (3) or (4), nature of the offence and also the circumstances of the commission of the offence, postpone his or her punishment or make any of following appropriate decisions as punishment, with or without specifying the terms and conditions:
(a) To counsel or advise the child about good human behaviours by any family member or guardian,
(b) To give orientation to the child through any institution or person that provides the service,
(c) To provide single, group or family psycho-social counselling service,
(d) To keep the child under the observation of any family member, guardian, school, person or institution that provides service for a fixed period subject to the observance of the specified terms and conditions,
(e) To send the child for community service that is suitable to his or her age, by specifying the nature and period of service,
(f) To make the child stay in the child reform home for a period not exceeding that of the punishment imposed on him or her.
(6) If any person has caused a child to commit an offence, by teaching, giving pressure, ordering, luring or in any other manner, that person who has taught so, given pressure, ordered, lured or made to commit it shall be punished pursuant to law as if that person committed the offence on his or her own.
(7) Notwithstanding anything contained elsewhere in this Section, while punishing a child who has not completed sixteen years of age, no punishment of imprisonment shall be imposed on such a child except in cases where he or she has committed a heinous offence, grave offence or repeated the offence.
(2) The Juvenile Court may reduce or remit the remaining period of reform of the child if it thinks it reasonable to reduce or remit the period of reform upon examining the recommendation received pursuant to sub-section (1).
(2) Other provisions relating to restorative justice shall be as prescribed.
(2) Notwithstanding anything contained in the prevailing laws, although any child commits an offence time and again, he or she shall not be subjected to additional punishment on the basis of repetition of the commission of the offence.
(2) Any institution may, with the approval of the Government of Nepal, establish a child reform home, for the purpose of sub-section (1).
(3) The Juvenile Court may monitor and inspect the child reform homes established within its territorial jurisdiction, issue necessary directives to such child reform homes and order such child reform homes to submit reports on the condition of reform of the children kept in such homes.
(4) If a child kept in a child reform home attains the age of eighteen years before completion of the period for which he or she has to remain in the child reform home, he or she shall be kept separately from the other children in the child reform home for the remaining period by considering, inter alia, the improvement seen in his or her behaviour, continuity of skills and education gained.
(5) The establishment, operation, monitoring and other arrangement of the child reform home shall be as prescribed.
(2) An institution or person who keeps the child as per the order issued pursuant to sub-section (1) shall submit a report related to the health of the child to the concerned Juvenile Court in every six months.
(3) If the child is found to be healthy or free from addiction on the basis of the report referred to in sub-section (2), the Juvenile Court may issue an order to return that child to his or her previous condition.
(2) The provisions regarding the preparation of the study report referred to in sub-section (1) shall be as prescribed.
(2) The meetings, functions, duties and powers of the Central Juvenile Justice Committee shall be as prescribed.
(a) Orphan children,
(b) Children that have been left or found abandoned in hospitals or other public places or separated from parents or left unclaimed, with the identity of their parents unknown,
(c) Children that are deprived of appropriate care due to serious physical or mental disability or incapacity of their parents,
(d) Out of the children in conflict with law, those who have been referred for alternative care under the diversion process,
(e) Children who are staying in prison being dependent on their father or mother who is detained or imprisoned,
(f) Infants born due to rape or incestuous relationships that are punishable by law and concerning whom application has been made to the child welfare authority, stating inability to maintain them,
(g) Children who have been separated from their families for their best interests due to abuse, violence or neglect by their respective father, mother or guardian,
(h) Children who are earning their living by engaging in labour that is forced or bonded or hazardous or worst in form or that contravenes a prevailing law, who are addicted to smoking, drinking or other narcotic drugs, or are infected with HIV,
(i) Children who are experiencing difficulty leading normal life or whose lives are at risk, having been suffering from serious physical or mental health problems or serious disability, due to the inability of their parents or families to afford treatment,
(j) Children who are the victims of offences against children or are at such risks,
(k) Children who have lost both or either of their parents, or whose parents have disappeared, or have themselves got injured physically or mentally or disability due to a disaster or armed conflict,
(l) Children belonging to deprived Dalit communities,
(m) Such other children as may be specified as children in need of special protection by the Ministry by publishing a notice in the Nepal Gazette.
(2) Other services and support, including rescue, temporary protection, health treatment, psychosocial support, family reunion, rehabilitation, alternative care, family support, social security and socialization, as required, to children referred to in subsection (1) shall be as prescribed.
(2) The child welfare authority shall make arrangements for alternative care for the children referred to in sub-section (1) on the basis of the following order of priority:
(a) Relative from the side of the father or mother of the child,
(b) Family or person willing to provide care to the child,
(c) Organization that provides foster (family-modelled) care,
(e) Children’s home.
(3) Other provisions relating to alternative care shall be as prescribed.
(2) If information is received pursuant to sub-section (1), the child welfare authority shall, if he or she finds it necessary to urgently rescue the child, rescue the child and keep him or her in a temporary protection service referred to in Section 69.
(3) The child welfare authority may make arrangements for providing necessary services, upon conducting inquiry on the basis of the information received pursuant to sub-section (1).
(4) The child welfare authority may entrust a social service provider in order to provide necessary services pursuant to sub-section (3), as prescribed.
(5) While conducting inquiry pursuant to sub-section (3), other services needed by the children in need of special protection shall be ensured. If it is deemed that special protection is not necessary and the child’s father, mother, other family member or guardian has been traced, the child welfare authority may hand over the custody of such children to them.
(6) If the child welfare authority thinks that any support is needed for handing over the custody of the child to her or his father, mother, other family member or guardian pursuant to sub-section (5), he or she shall make arrangements for necessary services such as sponsorship or family support, by making coordination with the relevant organizations.
Clarification: For the purposes of this Section:
(a) “Sponsorship” means the act of making available financial support on the long-term or short-term basis for necessary maintenance and education for children by any person, organization or body.
(b) “Familial support” means the support provided for creating an environment that is conducive to safeguarding of children within the family by identifying and addressing the economic and social factors that lead the child’s family to disintegration, while maintaining unity and harmony in the family.
(7) If, in making examination and inquiry pursuant to sub-section (3), it appears that alternative care is necessary, the child welfare authority shall make arrangements for such care.
(8) In a case involving a child as a victim, the child welfare authority shall arrange for separating a child victim from her or his parents or family and keep him or her in a temporary protection service for a certain period of time, if the child so desires, or the parent or guardian is the perpetrator or because of their complicity with the perpetrator there is a possibility of greater risk to the child, or there is likelihood of obstruction in the examination, inquiry, proceedings and fact-finding of the incident.
(9) If, in spite of making examination and inquiry pursuant to sub-section (3), the paternity and maternity of the child cannot be determined, the child welfare authority shall recommend for her or his birth registration and government identity card setting out the identity.
(2) The provisions relating to the establishment of children’s home, qualifications of operators, operational licence, renewal, classification, management, operation standards and monitoring shall be as prescribed.
(2) After the commencement of this Act, no child shall be kept in a children’s home except as in accordance with Sections 49 and 69.
Clarification: For the purposes of this Section, “chief of the organization” means the chief executive officer or chairperson, managing director of such an organization acting in that capacity or such other officer as designated pursuant to the rules of that organization.
(2) If any organization that has been entrusted with the responsibility of guardianship acts in contravention of the prescribed conditions and procedures, the child welfare authority may prevent the organization from engaging in child protection activities, also setting out the conditions breached by it.
(3) If it is established from the monitoring that an organization that has been prevented pursuant to sub-section (2) has made desired improvements, the child welfare authority may remove the prevention made on the organization from engaging in child protection activities.
(2) It shall be the liability of the school, chief of every public body, private sector and social organization to enforce the child protection standards formulated pursuant to sub-section (1).
(2) Based on the details received pursuant to sub-section (1), the Local Child Rights Committee shall prepare and submit a report to the Provincial level Child Rights Committee and Local Level Child Rights Committee on an annual basis.
(3) The Provincial Child Rights Committee and Local Child Rights Committee shall periodically inspect and monitor the overall status of children and the quality and effectiveness of the available services within the Province and the Local Level, respectively.