Bank and Financial Institution Act 2073

Chapter -7 Provisions on Operation of Banking and Financial Transactions

Section 49: Bank or Financial Institution may carry on Banking and Financial Transactions
1) The class “A” banks may carry on the following banking and financial transactions subject to this Act, Memorandum of Association and Articles of Association and limitation, conditions imposed and direction issued by the Rastra Bank:-
(a) To accept deposits or to mobilise deposits through various financial instruments and make payment thereof with or without interest,
(b) To accept deposits, make payments, have transactions, carry on intermediary services and transfer funds through various electronic instruments or devices,
(c) To lend loans, including hire-purchase, leasing, housing and overdrafts,
(d) To lend a loan on the collateral of the project and hypothecation and lending or causing to be lending loans in consortium financing having divided the collateral on pari passu according to a mutual agreement entered into between one another,
(e) To lend loans on the guarantee of a foreign bank or financial institution,
(f) To lend loans in the amount covered by the value of the movable or immovable assets which has already been mortgaged to it or lending loans on remortgage in the 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 execute 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, accept the assets holding as security and to carry on other related transaction,
(h) To make available refinance from the Rastra Bank as may be necessary or to lend or borrow loans from other banks or financial institutions,
(i) To supply loans or manage loans from the amount received from the Government of Nepal or other native or foreign agencies for the promotion of a project,
(j) To write off credits subject to the prevailing credits write-off Byelaws,
(k) To issue shares, debenture, debenture bonds, etc. so on, for the purpose of meeting the capital fund,
(l) To issue, accept, pay, discount or purchase and sell letters of credit,  bills of exchange, promissory notes, cheques, traveller’s cheques, drafts or other financial instruments,
(m) To issue, accept and manage digital cards or other instruments for electronic transactions and appoint agents for carrying out acts relating thereto,
(n) To carry on foreign exchange business subject to the prevailing laws,
(o) To carry on government transactions subject to the limits, terms and conditions or direction of the Rastra Bank,
(p) To purchase, sell or accept treasury bills issued by the Government of Nepal or bonds issued by the Rastra Bank,
(q) To remit or transmit the 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 for and arrange 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 on off-balance sheet transactions,
(t) To disburse credits up to the amount as prescribed by the Rastra Bank against individual or collective guarantee for the economic upliftment of the people from deprived sector, low-income families, victims of natural calamities and inhabitants in any area of the country,
(u) To exchange details, information or notices on 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 of gold and silver bullion,
(w) To conduct, or causing to be conducted, study, research and survey work 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 to come under its ownership according to this Act and the prevailing laws,
(y) To give a guarantee with the consent of the parties involved on matters of payment to be made or values to be recovered for the performance of any act between two or more persons, subject to the prevailing laws,
(z) To perform other functions as may be prescribed by the Rastra Bank.
2) The Class “B” financial institution may carry on the following banking and financial transactions, in addition to 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 SubSection (1) subject to this Act, the Memorandum of Association and Articles of Association and limitation and conditions imposed and directives issued by the Rastra Bank:-
(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 bank 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, traveller’s cheques, drafts,
(d) To accept loans in mortgage of its movable and immovable assets,
(e) To carry on transactions of letters of credit and remittance with prior approval of 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 arrangements of safe deposit vaults for customers acting as a commission agent of its customers,
(g) To carry on transactions of transfer of amount within Nepal,
(h) To carry on, or cause to be carry on study, research and survey work relating to the project establishment and operation as well as banking, account, property, and 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) Class “C” financial institution may carry on the following financial transactions, 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) subject to this Act and the Memorandum of Association and Articles of Association, the limitation and conditions imposed and directives issued by the Rastra Bank: –
(a) To disburse credit for hire-purchase, leasing, housing loans,
(b) To make arrangements for jointly disbursing 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 accept loans having mortgaged 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, traveller’s cheques or other financial instruments,
(f) To carry on the transaction of foreign currencies by obtaining approval from the Rastra Bank,
(g) To disburse instalment or hire-purchase loan 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,
(j) 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,
(i) To sell off or lease out whole or part of its assets,
(j) To prescribe prices of goods on consent with the finance company and seller in case any goods procured have to be sold to other purchasers on the current price or deferred price,
(k) To carry out other functions as may be prescribed by the Rastra Bank.
4) The Class “D” financial institution may carry on the following banking and financial transactions subject to this Act, Memorandum of Association and Articles of Association and limitation, conditions imposed and direction issued by the Rastra Bank:
(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 which/who has regularly saved for the period and maintained the prescribed savings,
(b) To accept loans or grants from any bank or financial institution or native or foreign organisation 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 organisation.
(c) Prior to disbursing micro-credits, 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 groups with regard to the mobilisation of microfinance,
(e) To carry out necessary actions for recovery of the microcredits on time,
(f) To accept deposits and refund such deposits subject to the limit prescribed by the Rastra Bank by getting approval from 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 debtors 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 institution particulars of,
(i) To carry out such other functions as may be prescribed by the Rastra Bank.
5) The infrastructure development banks may carry on the following transactions subject to this Act, Memorandum of Association, Articles of Association, and limits, conditions and directives of the Rastra Bank:-
(a) To Disburse loans and financing 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 credit and issue guarantees for the purchase, sale, supply or installation of machinery, equipment and tools required for the construction and operation of projects relating to infrastructure development,
(d) To issue financial instruments in national or foreign currencies with approval of the Rastra Bank for collecting funds required for investment in projects concerning infrastructure development and to acquire loans to that effect,
(e) To mobilise resources by accepting long-term deposits or issuing debenture,
(f) To carry on leasing transactions with the approval of the Rastra Bank,
(g) To provide loans and facilities for projects by accepting guarantees of foreign banks and financial institutions,
(h) To carry out other acts as prescribed by the Rastra Bank.