Chapter -7 Provisions Relating to Operation of Banking and Financial Transactions

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.