chhatramani/nepal_legal_acts_corpus_english huggingface dataset:
Banks and Financial Institutions Act, 2017

23. Accountability and liability of the director: (1) A director shall not do or cause to be done any act for personal gain through the bank or financial institution or in the course of the work of the bank or financial institution.

(2) A director acting in the capacity of a director of the bank or financial institution shall be personally liable for any act or activity done exceeding his/her authority.

(3) A director of a bank or financial institution shall assume responsibility for adopting efficient business strategies of the institution and for risk management and internal control.

(4) A director shall not interfere in the day-to-day operations of the management of the bank or financial institution.

(5) A director shall fully comply with the directives given by the Nepal Rastra Bank from time to time. 24. Details of a director to be obtained: A bank or financial institution shall obtain the following details of a director: -

(a) Name, surname, address, educational qualification, occupation and experience of the director,

(b) If the person has worked as a director, officer or employee of any other body, details specifying the rank and responsibility,

(c) Name, surname and details of related persons of the family of the director, and the financial interest of such person and his/her family in the bank or financial institution and other bodies, and the share ownership of that institution held in the name of such person and his/her family,

(d) Details of shares or debentures taken by the director or his/her family in the bank or financial institution or its main or subsidiary company,

(e) Details if any member of the family is working as an officer or employee in the bank or financial institution,

(f) Details if the director or any member of his/her family has made or is about to make any kind of contract with the bank or financial institution,

(g) Details if there is any kind of interest or concern regarding the appointment of the chief executive, company secretary and auditor,

(h) Written authority given to the Nepal Rastra Bank to inquire or cause to inquire into the financial and professional background of the director, or to exchange or cause to exchange such information and knowledge,

(i) Self-declaration that the person is qualified to be a director under this Act,

(j) Other details as prescribed by the Nepal Rastra Bank from time to time to be notified to the Nepal Rastra Bank and the board of directors. 25.
Banks and Financial Institutions Act, 2017

25. Information and record of the director: (1) A director shall submit the details pursuant to Section 24 to the bank or financial institution within seven days of his/her appointment.

(2) The bank or financial institution shall maintain a separate record of the details submitted pursuant to sub-section (1).

(3) If the director or any member of his/her family has significant ownership or any other kind of interest, directly or indirectly, in the bank or financial institution, such director shall provide complete details of such information at the first meeting of the board of directors.

(4) When any matter related to the personal interest of a director is discussed in a meeting of the board of directors or any sub-committee, he/she shall disclose such interest at the beginning of the meeting and shall abstain from the discussion or voting on such matter.

(5) If the details pursuant to sub-section (1) change, or if there is a change in the director, notice thereof shall be sent to the Nepal Rastra Bank within fifteen days.

(6) If deemed necessary to inquire into the information mentioned in sub-section (5), the Nepal Rastra Bank shall have the authority to inquire or cause to inquire into the same. 26. May form a sub-committee: (1) Except for matters explicitly stated to be done by a particular body or officer under this Act, the board of directors may, subject to the directives of the Nepal Rastra Bank, form one or more sub-committees for a specific purpose. Provided that the chairperson of the board of directors shall not be a member of the sub-committee.

(2) The functions, duties, powers, procedures and remuneration or allowances payable to a member for participating in the meeting of the sub-committee formed pursuant to sub-section (1) shall be as determined by the board of directors, and the work carried out and expenses incurred by such sub-committee shall be clearly disclosed in the annual report. 27. Delegation of authority: The board of directors may, specifying the justification and reasons therefor, delegate some of the powers vested in it to any director, a sub-committee formed pursuant to Section 26, the chief executive of the bank or financial institution, or any person acting as the chief executive, to work under its supervision and direction. 28. Allowances and facilities of the director: The meeting allowance and other facilities that a director is entitled to for attending the meeting shall be as prescribed in the articles of association. 29.
Banks and Financial Institutions Act, 2017

28. Allowances and facilities of the director: The meeting allowance and other facilities that a director is entitled to for attending the meeting shall be as prescribed in the articles of association. 29. Appointment and terms of service of the chief executive: (1) The board of directors shall appoint a chief executive to manage the bank or financial institution, subject to this Act, the memorandum and the articles of association.

(2) The term of office of the chief executive shall be a maximum of four years, and he/she may be reappointed for one additional term.

(3) The provision mentioned in sub-section (2) shall apply only after the commencement of this Act.

(4) Notwithstanding anything contained in sub-section (2), if the performance of the chief executive is not satisfactory, the board of directors may remove him/her from office at any time. Provided that before removing him/her from office in such manner, he/she shall be given a reasonable opportunity to present his/her defense.

(5) When appointing the chief executive, a person possessing the following qualifications and experience shall be appointed, and the Nepal Rastra Bank shall be informed of such appointment within seven days: -

(a) Has obtained a master's degree in management, banking, finance, monetary, economics, commerce, statistics, accountancy, accounting, mathematics, business administration, or law,

(b) Has obtained a chartered accountancy or a bachelor's degree in management, banking, finance, monetary, economics, commerce, statistics, accountancy, accounting, mathematics, business administration, or law, and has at least ten years of work experience at the officer level or above in the banking and financial sector, government body, organized institution, university, or an international association or organization performing such work,

Provided that, in the case of a chief executive of a class "gha" financial institution, the educational qualification and work experience as prescribed by the Nepal Rastra Bank shall be required.

(c) Has fulfilled the criteria prescribed by the Nepal Rastra Bank regarding the appointment of the chief executive,

(d) Is not disqualified under sub-section (1) of Section 18.
Banks and Financial Institutions Act, 2017

Provided that the provisions relating to disqualification mentioned in clauses (jha) and (ḍha) of sub-section (1) of Section 18 shall not apply in the case of the chief executive.

(6) If the chief executive appointed pursuant to sub-section (1) is not found to be qualified under this Act, the Nepal Rastra Bank may order the concerned bank or financial institution to remove him/her and appoint another person who is qualified for appointment as chief executive under this Act.

(7) The remuneration, other terms of service and facilities of the chief executive shall be as determined by the board of directors, and the terms of service and facilities shall be determined at the time of appointment.

(8) The chief executive of a bank or financial institution shall not work as the chief executive, officer, employee, or hold any other position in any other commercial entity. Provided that this sub-section shall not be deemed to prevent a bank or financial institution from being a director of an infrastructure development bank if the bank or financial institution has invested in that development bank. 30. Functions, duties and powers of the chief executive: (1) The functions, duties and powers of the chief executive shall be as follows: -

(a) To exercise the powers conferred by the board of directors, subject to the memorandum and articles of association, to implement decisions of the board of directors, and to oversee and control the activities and transactions of the bank or financial institution,

(b) To prepare the annual budget and work plan of the bank or financial institution and submit them to the board of directors for approval,

(c) To manage necessary human resources, subject to the employee bylaws of the bank or financial institution,

(d) To implement or cause to implement the decisions made by the general meeting,

(e) To operate the institution in accordance with this Act and the directives of the Nepal Rastra Bank, and to ensure effective internal control and risk management of the bank or financial institution,

(f) To submit details, documents, decisions, etc., required to be submitted by the bank or financial institution to the Nepal Rastra Bank or any other body, in a timely manner, subject to this Act, the directives of the Nepal Rastra Bank, the memorandum and the articles of association,

(g) To operate in the best interest of depositors, shareholders and the bank or financial institution,

(h) To implement appropriate standards for top management, subject to the policies determined by the board of directors.

(2) The chief executive shall be responsible to the board of directors for his/her work. Chapter 5
Provisions Relating to License

31.
Banks and Financial Institutions Act, 2017

Chapter 5
Provisions Relating to License

31. No person other than a bank or financial institution to conduct banking and financial transactions: (1) No person other than a bank or financial institution that has obtained a license to conduct banking and financial transactions pursuant to Section 34 shall conduct banking and financial transactions under this Act.

(2) The Nepal Rastra Bank shall formulate and implement a license policy relating to banks and financial institutions for the purpose of granting licenses to banks and financial institutions. 32. Use of the name of a bank or financial institution: (1) No person shall use the name of a bank or financial institution for the purpose of conducting banking and financial transactions without the approval of the Nepal Rastra Bank.

(2) Except for a bank or financial institution licensed to conduct banking and financial transactions under Section 49 of this Act and a foreign bank or financial institution opening a branch office in Nepal, no other person, company or institution shall use the terms 'Bank', 'Banking', 'Finance', 'Financial' or any other sign, adjective or similarly meaningful word with its name without prior approval from the Nepal Rastra Bank.

(3) Notwithstanding anything contained in sub-section (2), the provision mentioned in sub-section (2) shall not apply to the following institutions: -

(a) Any institution established or recognized under the prevailing law or international treaty or practice,

(b) A company that, within six months of establishment under the prevailing law, applies for a license to conduct banking and financial transactions.

(4) Notwithstanding anything contained in sub-section (2), a bank or financial institution that has obtained approval to conduct financial transactions under the prevailing law at the time of commencement of this Act may conduct financial transactions using the name that existed at the time of obtaining approval for such transactions.

(5) Financial institutions of class "kha", "ga" and "gha" shall use the names Development Bank, Finance Company, and Micro Finance Financial Institution respectively.

(6) An institution licensed to use the name Micro Finance Development Bank prior to the commencement of this Act shall use the name pursuant to sub-section (5) after the commencement of this Act. 33.
Banks and Financial Institutions Act, 2017

34. May grant license to conduct banking and financial transactions: (1) If, upon examining the application received pursuant to Section 33 and the documents or details attached therewith, it is found that all bases for conducting banking and financial transactions under this Act are met, the Nepal Rastra Bank may, within one hundred and twenty days of receipt of the application, grant a license of any one class to such bank or financial institution to conduct banking and financial transactions based on the classification of the bank or financial institution under Section 37.

(2) Before granting a license pursuant to sub-section (1), the Nepal Rastra Bank shall ascertain the following matters: -

(a) That granting a license to conduct banking and financial transactions will result in healthy competition and effective financial intermediation transactions, ensuring the interest of depositors,

(b) That the entity is capable of conducting banking and financial transactions subject to this Act or the rules, regulations, orders or directives made under this Act, and the memorandum and articles of association,

(c) That the details and documents attached with the application for license under Section 33 are complete and that there is adequate physical infrastructure,

(d) That any officer appointed or associated, or to be appointed or associated, in the bank or financial institution is capable of conducting banking and financial transactions.

(3) When granting a license to conduct banking and financial transactions, if the Nepal Rastra Bank specifies the date on which the license shall take effect, it shall be deemed to have commenced from that date, and if no such date is specified, from the date of issuance of the license. 35. May refuse to grant license: (1) Notwithstanding anything contained in Section 34, the Nepal Rastra Bank may refuse to grant a license to a bank or financial institution to conduct banking and financial transactions in any of the following circumstances: -

(a) If it would adversely affect the stability, fair competition and credibility of the financial system of Nepal,

(b) If it would not be proper and appropriate to grant a license to conduct financial transactions for the protection of the interests of depositors,

(c) If the infrastructure for conducting banking and financial transactions is not complete,

(d) If other details or conditions under this Act are not found to have been fulfilled.

(2) If a license to conduct banking and financial transactions cannot be granted under this section, the Nepal Rastra Bank shall, within ninety days from the date of application, notify the concerned bank or financial institution thereof, stating the reasons. 36.
Banks and Financial Institutions Act, 2017

36. Nepal Rastra Bank may impose conditions: (1) While granting a license to conduct banking and financial transactions under Section 34, the Nepal Rastra Bank may impose necessary conditions having regard to the existing situation of the bank or financial institution, the healthy operation of financial transactions and the interests of depositors. It shall be the duty of the concerned bank or financial institution to comply with such conditions.

(2) The Nepal Rastra Bank may, from time to time, make additions, deletions or modifications to the conditions imposed under sub-section (1) as necessary. 37. Classification of banks or financial institutions: Based on the minimum paid-up capital of the bank or financial institution applying for license under Section 33 to conduct banking and financial transactions, and the transactions and scope of business conducted by such bank or financial institution, the Nepal Rastra Bank shall classify the bank or financial institution into class "ka", "kha", "ga" or "gha" and grant the license accordingly to the concerned bank or financial institution. Provided that an infrastructure development bank shall not be included in any class. 38. May be converted into a higher class bank or financial institution: (1) If a financial institution of a lower class desires to be converted into a bank or financial institution of the immediate higher class, it shall submit an application to the Nepal Rastra Bank along with the details prescribed by the Nepal Rastra Bank.
Banks and Financial Institutions Act, 2017

Provided that a class "gha" institution shall not be convertible into a higher class.

(2) If, upon examining the application under sub-section (1) and the details attached therewith, it appears appropriate to convert such financial institution into a bank or financial institution of the immediate higher class, the Nepal Rastra Bank may grant prior approval subject to the following: -

(a) The paid-up capital as prescribed by the Nepal Rastra Bank for the higher class bank or financial institution has been fulfilled,

(b) Capital adequacy as per the directives of the Nepal Rastra Bank has been maintained continuously for the past five years, the institution has been in profit continuously for five years, and the average non-performing loan for the past five years is within the limit prescribed by the Nepal Rastra Bank,

(c) Preliminary expenses have been written off,

(d) Shares that need to be publicly issued have been issued and allotted,

(e) The general meeting has passed a special resolution to convert into a higher class bank or financial institution,

(f) All other conditions prescribed by the Nepal Rastra Bank have been fulfilled.

(3) The bank or financial institution that has obtained prior approval under sub-section (2) shall cause the memorandum or articles of association to be amended in accordance with the prevailing law, and the Nepal Rastra Bank shall grant a license for the higher class bank or financial institution under this Act. 39. List to be published: (1) The Nepal Rastra Bank shall publish a list of banks and financial institutions conducting banking and financial transactions each month through a national daily newspaper or any other medium.

(2) The list published pursuant to sub-section (1) may include the date of commencement of transactions, paid-up capital, capital fund position, total loans, non-performing loan position, and other details deemed necessary by the Nepal Rastra Bank. Added by the Act to Amend Some Nepal Acts to Make Them Consistent with the Constitution of Nepal, 2018 (2075).39ka. Provisions relating to operation of financial institutions in provinces: (1) Financial institutions may be operated limited to the provincial level, subject to the limits, conditions or directives prescribed by Nepal Rastra Bank.

(2) A financial institution pursuant to sub-section (1) shall obtain a license in accordance with the law made by the province, subject to the licensing policy determined by Nepal Rastra Bank.

(3) The regulation, inspection and supervision of financial institutions operated under this section shall be done by Nepal Rastra Bank.

(4) Other provisions relating to the operation of provincial-level financial institutions shall be as provided in the law of the concerned province, subject to this Act. 40.
Banks and Financial Institutions Act, 2017

40. Special provisions relating to branch of a foreign bank: (1) If the Nepal Rastra Bank approves an internationally rated foreign bank to conduct banking and financial transactions in Nepal through a branch, the branch registered under the company law in force in Nepal shall be deemed equivalent to a bank or financial institution established under this Act, and all other provisions of this Act or the rules, regulations, orders or directives made under this Act shall apply equally to such branch, except where otherwise provided.

(2) The Nepal Rastra Bank may issue necessary directives regarding the functions, duties, powers, responsibilities, liabilities, property, accounts, etc., of the branch of a foreign bank, and regarding the responsibility of officers and employees performing such activities.

(3) The branch of a foreign bank located in Nepal shall, while using its assets to fulfill its liabilities, give first priority to the liabilities in Nepal and fulfill them, without adversely affecting any other legal provision.

(4) Notwithstanding anything contained elsewhere in this Act, the branch of a foreign bank may conduct wholesale banking transactions.

(5) The work and activities of the branch office of a foreign bank shall be as prescribed by the Nepal Rastra Bank. Chapter 6
Provisions Relating to Capital, Capital Fund and Liquid Assets

41. Capital to be maintained: (1) The minimum paid-up capital of a bank or financial institution shall be as determined by the Nepal Rastra Bank from time to time.

(2) The bank or financial institution shall complete the minimum paid-up capital under sub-section (1) within the time period determined by the Nepal Rastra Bank.

(3) The Nepal Rastra Bank may provide that any person, firm, company or institution may invest up to a maximum of fifteen percent of the paid-up capital of any one bank or financial institution.

(4) A person, firm, company or institution investing in one bank or financial institution pursuant to sub-section (3) shall, when investing in another bank or financial institution, make the investment at a rate not exceeding one percent of the paid-up capital of that bank or financial institution.

(5) The provision regarding the limit up to which any person, firm, company or institution may invest in the paid-up capital of a bank or financial institution established with foreign joint investment, a class "gha" financial institution, and an infrastructure development bank shall be as prescribed by the Nepal Rastra Bank.

(6) The percentage of share capital that any person or institution may invest in establishing a bank or financial institution or in such bank or financial institution shall be as determined by the Nepal Rastra Bank from time to time. 42.
Banks and Financial Institutions Act, 2017

42. Capital fund: (1) A bank or financial institution shall maintain a capital fund in the ratio prescribed by the Nepal Rastra Bank based on its total assets or total risk-weighted assets. The Nepal Rastra Bank may also prescribe an additional capital fund ratio when prescribing such ratio.

(2) If a bank or financial institution fails to maintain the capital fund under sub-section (1), the board of directors of such bank or financial institution shall inform the Nepal Rastra Bank thereof within one month.

(3) The information under sub-section (2) shall, in addition to other matters, attach the reasons for the failure to maintain the capital fund and the plan or program prepared by the board of directors to increase the capital fund and bring it to the condition as directed by the Nepal Rastra Bank.

(4) If the information and the plan or program submitted by the board of directors under sub-sections (2) and (3) appear reasonable, the Nepal Rastra Bank may issue necessary directives to the concerned bank or financial institution to implement accordingly, and if any modification or alteration is required, to implement the proposed plan or program after modification or alteration by stating reasons therefor. 43. Provision relating to possible loss: A bank or financial institution shall make provisions for losses as prescribed by the Nepal Rastra Bank to cover potential risks related to its assets including loans and off-balance sheet transaction liabilities. 44. General reserve fund: (1) A bank or financial institution shall maintain a general reserve fund. Until the amount in such reserve fund equals twice the amount of paid-up capital, at least twenty percent of the net profit of each fiscal year shall be added to it, and thereafter at least ten percent shall be added in subsequent fiscal years.

(2) The amount accumulated in the general reserve fund of a bank or financial institution under sub-section (1) shall not be transferred to other heads or expended without prior approval of the Nepal Rastra Bank. 45. Exchange equalization fund: (1) A bank or financial institution engaged in foreign exchange transactions shall, at the end of each fiscal year, adjust the revaluation profit earned due to changes in the exchange rate of foreign currencies other than Indian Rupees in the profit and loss account. When making such adjustment in the profit and loss account, if there is revaluation income in any fiscal year, at least twenty-five percent of such profit shall be deposited in the exchange equalization fund.
Banks and Financial Institutions Act, 2017

When making such adjustment in the profit and loss account, if there is revaluation income in any fiscal year, at least twenty-five percent of such profit shall be deposited in the exchange equalization fund. Provided that, in the case of revaluation profit or loss arising from changes in the exchange rate of Indian Rupees, it shall be as prescribed by the Nepal Rastra Bank.

(2) The amount deposited in the exchange equalization fund under sub-section (1) shall not be spent on other purposes or transferred without the approval of the Nepal Rastra Bank, except to adjust losses arising from fluctuations in foreign exchange rates. 46. Liquid assets to be maintained: A bank or financial institution shall maintain liquid assets as prescribed by the Nepal Rastra Bank from time to time. 47. Declaration and distribution of dividend: (1) A bank or financial institution shall obtain the approval of the Nepal Rastra Bank before declaring and distributing dividends.

(2) A bank or financial institution shall not declare or distribute dividends to shareholders until all its preliminary expenses, losses incurred up to the previous year, capital, capital fund, possible loss provisions prescribed by the Nepal Rastra Bank, and the amount required to be set aside in the general reserve fund under Section 44 are fully met, and until the shares set aside for the general public are fully sold and distributed. 48. May order to reduce capital: Notwithstanding anything contained in the prevailing law, the Nepal Rastra Bank may order a bank or financial institution to reduce its issued and paid-up capital. Chapter 7
Provisions Relating to Conduct of Banking and Financial Transactions

49.
Banks and Financial Institutions Act, 2017

51. Provisions relating to subsidiary company: (1) A bank or financial institution may establish a subsidiary company with the approval of Nepal Rastra Bank.

(2) While granting approval to establish a subsidiary company pursuant to sub-section (1), Nepal Rastra Bank may prescribe necessary conditions. 52. Not to transact with related persons: No bank or financial institution shall provide any loan or facility to related persons. 53. To inform about suspicious transactions: A bank or financial institution shall, regarding the identification of account holders or customers transacting with it and the reporting of suspicious transactions, act in accordance with the provisions of the prevailing laws relating to the prevention of money laundering and financing of terrorist activities. 54. Nepal Rastra Bank to issue directives: Nepal Rastra Bank may issue necessary directives concerning the procedural arrangements and other matters to be followed by a bank or financial institution while conducting business under this Chapter. Chapter-8

Provisions relating to Loan Disbursement and Recovery

55. Provisions relating to loan disbursement: (1) Subject to the directives of Nepal Rastra Bank and the loan policy determined by the board of directors, a bank or financial institution shall disburse loans only after specifying the purpose. Amended by the Act Amending Some Nepal Acts relating to Improvement of Economic and Business Environment and Enhancement of Investment, 2081.(2) While providing a loan, a bank or financial institution may, by accepting movable or immovable property acceptable to it as collateral, or other appropriate guarantee, or by accepting the project development agreement entered into between the Government of Nepal, a provincial government, a local level or a body under such government or level and the investor for implementing a project under the concept of public-private partnership as security, disburse the loan in a manner that protects the interest of itself and the depositors.

(3) For the property taken as security for a loan pursuant to this section to be registered, filed, endorsed or attached in the name of the bank or financial institution so that it cannot be registered, filed, endorsed or transferred in anyone else’s name for any reason, the bank or financial institution shall send a letter to the relevant office.
Banks and Financial Institutions Act, 2017

Added by the Act Amending Some Nepal Acts relating to Improvement of Economic and Business Environment and Enhancement of Investment, 2081.(3A) In case a problem arises in a project implemented pursuant to a project development agreement entered into between the Government of Nepal, a provincial government, a local level or a body under such government or level and the investor under the concept of public-private partnership, or in case the borrower fails to fulfill the loan obligation, the bank or financial institution shall have the right to exercise step-in rights in accordance with the agreement made with the Government of Nepal, the relevant provincial government, the local level or the body under such government or level.

(4) Upon receiving a letter for registration, filing or attachment pursuant to sub-section (3), the relevant office shall register, file or attach as per the letter.

(5) If Nepal Rastra Bank issues a directive to provide loans to a priority class or sector for the economic upliftment of low-income and disadvantaged persons and residents living in a particular geographical area, the bank or financial institution shall provide loans accordingly.

(6) The terms, tenure and interest rate of a loan taken by a borrower from a bank or financial institution shall be as specified in the deed or contract made regarding the loan transaction.

(7) The bank or financial institution shall obtain details and identification evidence necessary for taking action pursuant to prevailing law regarding the borrower, the guarantor, or if the borrower is a firm, company or institution, its directors, shareholders holding more than the percentage prescribed by Nepal Rastra Bank, partners or persons having any other type of ownership, the families of all the aforementioned persons, and wherever such persons are beneficiaries.

(8) While providing a loan, the bank or financial institution shall clearly mention in the deed or contract the loan amount provided to the borrower, the applicable interest, penalty, and the repayment schedule, and shall provide information thereof to the borrower and, if there is a guarantor, also to the guarantor.

(9) The borrower may request details of the loan principal, interest, penalty and other fees payable or paid by him/her, as well as documents relating to the deed or contract made to obtain the loan, and the bank or financial institution shall make such details available to the borrower. 56. Monitoring relating to proper utilization of loan amount: The bank or financial institution shall prepare a monitoring schedule and regularly monitor whether the borrower has properly utilized the loan amount for the purpose for which the loan was provided. 57.
Banks and Financial Institutions Act, 2017

56. Monitoring relating to proper utilization of loan amount: The bank or financial institution shall prepare a monitoring schedule and regularly monitor whether the borrower has properly utilized the loan amount for the purpose for which the loan was provided. 57. Provisions relating to loan recovery: (1) If the borrower fails to comply with the terms and conditions mentioned in the deed or contract relating to the loan transaction, or fails to repay the loan and applicable interest or penalty within the tenure stipulated in the deed or contract, or if upon monitoring pursuant to section 56 it appears that the borrower has misused the loan amount by not using it for the purpose for which it was taken, then, notwithstanding anything contained in the deed or contract relating to the loan transaction or in the prevailing law, the concerned bank or financial institution may recover its principal and interest by auctioning the security given in writing or pledged by the borrower or by making other arrangements.

(2) Notwithstanding anything contained in the prevailing law, if the security given in writing or pledged by the borrower to the bank or financial institution is in any way abandoned by anyone or the value of the security decreases due to any other reason, the bank or financial institution may, giving a specified period, require such borrower to provide additional collateral security, and the borrower shall provide additional collateral security within the period specified by the bank or financial institution.

(3) If the borrower fails to provide additional collateral pursuant to sub-section (2), or if the principal and interest cannot be recovered from the collateral security provided, the bank or financial institution may recover its principal and interest from other movable or immovable property owned by or belonging to the borrower, in accordance with the prevailing law.

(4) When recovering principal, interest and penalty amounts by auction or other arrangement pursuant to this section, after deducting the expenses incurred and the bank's or financial institution's principal, interest and penalty amounts, any remaining amount shall be returned to the concerned borrower.

(5) The bank or financial institution shall send a letter to the relevant office for registration or filing, in accordance with the prevailing law, in the name of the person acquiring the property auctioned pursuant to this section.

(6) Upon receiving a letter for registration or filing pursuant to sub-section (5), the relevant office shall register or file in the name of such auction purchaser, notwithstanding anything contained in the prevailing law.

(7) If no one purchases the movable or immovable property held as collateral security at auction pursuant to this section, such property may be taken into its own ownership by the bank or financial institution as prescribed.

(8) The bank or financial institution shall send a letter to the relevant office for registration or filing in its own name of the property taken into its ownership pursuant to sub-section (7).
Banks and Financial Institutions Act, 2017

Upon receiving such letter, the relevant office shall register or file such property in the name of the bank or financial institution, notwithstanding anything contained in the prevailing law.

(9) If the original owner refuses to allow possession or obstructs the use of property purchased by any person or bank or financial institution at auction, the relevant body of the Government of Nepal shall cause possession to be given in accordance with the prevailing law.

(10) A licensed institution shall not stop recovery proceedings for loans written off in accordance with the prevailing loan write-off by-laws.

(11) If a borrower fails to repay the loan taken from the bank or financial institution along with applicable interest and penalty within the tenure specified in the related deed or contract, the bank or financial institution shall send a letter to the Credit Information Centre Limited to place such borrower on the blacklist in accordance with the prevailing law.

(12) If the loan is still not recoverable even after initiating recovery proceedings against a borrower pursuant to this section, and if such loan can be recovered from any other assets of the borrower located abroad, the bank or financial institution may initiate necessary actions including attachment of assets in accordance with prevailing law for the purpose of recovering such loan.

(13) If the loan cannot be recovered even after all recovery proceedings pursuant to this section, the concerned bank or financial institution may request Nepal Rastra Bank to make necessary arrangements for impounding and confiscating the borrower's passport and for depriving the concerned borrower of any facilities provided by the state. Upon receiving such request, Nepal Rastra Bank shall forward it with its opinion to the Government of Nepal for necessary action.

(14) No action initiated by a bank or financial institution against any person in relation to loan recovery shall be deemed to bar proceedings against such person for any offence under the prevailing law. Chapter-9

Provisions relating to Accounts, Records, Statements and Reports

58.
Banks and Financial Institutions Act, 2017

Chapter-9

Provisions relating to Accounts, Records, Statements and Reports

58. Accounts to be kept properly: (1) A bank or financial institution shall keep its books of account, accounts, ledgers, registers and accounting records accurately and properly.

(2) The accounts maintained pursuant to sub-section (1) shall be kept in accordance with accepted principles based on the double entry bookkeeping system, clearly reflecting the true state of the bank's or financial institution's transactions.

(3) Without prejudice to the generality of sub-sections (1) and (2), a branch or office of a licensed foreign bank or financial institution shall prepare and maintain separate accounts, books of account, records and financial statements including profit and loss accounts, clearly showing its assets, liabilities, income, expenses, etc.

(4) The accounts and other statements maintained pursuant to sub-section (1) shall be kept at its head office, unless otherwise approved by Nepal Rastra Bank. 59. To prepare and maintain balance sheet, profit and loss account: (1) A bank or financial institution shall keep its balance sheet and profit and loss account, as well as other financial statements including cash flow, in accordance with the format and method prescribed by Nepal Rastra Bank.

(2) A bank or financial institution shall submit its balance sheet and profit and loss account statement to Nepal Rastra Bank within three months of the end of each fiscal year, and such balance sheet and profit and loss account statement shall be made public within the same period as prescribed by Nepal Rastra Bank for the information of the general public.
Banks and Financial Institutions Act, 2017

The bank or financial institution shall prepare the balance sheet and profit and loss account statement of transactions within and outside Nepal for each audited fiscal year and make it public in the prescribed format within nine months of the following fiscal year.

(3) The balance sheet and profit and loss account of a bank or financial institution shall, if there is a subsidiary company of such bank or financial institution, also indicate the transactions and financial condition of such subsidiary company separately and in consolidated form.

(4) The format, content, method of certification, and details to be made public of the balance sheet and profit and loss account to be prepared by a bank or financial institution under this Chapter shall be as prescribed or directed by Nepal Rastra Bank.

(5) If there is suspicion that matters mentioned in any statement made public by a bank or financial institution pursuant to sub-section (2) are false, incomplete, misleading or untrue, Nepal Rastra Bank may, giving written notice, require such bank or financial institution to do the following:

(a) Publish the omitted or not mentioned subject matter, or
(b) Correct the false, incomplete, misleading or untrue information and re-publish the statement, or
(c) Correct and publish other matters as prescribed by Nepal Rastra Bank through directives. 60. Audit Committee: (1) The board of directors of a bank or financial institution shall constitute an audit committee consisting of three members, with a non-executive director as its chairperson.

(2) The chairperson, deputy chairperson of the board and the chief executive of the bank or financial institution shall not serve on the audit committee formed pursuant to sub-section (1).

(3) A member of the audit committee formed pursuant to sub-section (1) shall not be involved in the regular day-to-day transactions including taking deposits, granting loans, investing in securities, or approving expenditure from the approved budget.

(4) Unless a meeting is called by the board of directors, the audit committee shall generally meet once every three months.

(5) The procedure for meetings of the audit committee shall be as determined by that committee. 61.
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61. Functions, duties and powers of the audit committee: The functions, duties and powers of the audit committee shall be as follows:

(a) To monitor and supervise whether the accounts, budget and internal audit procedures, and internal control system of the bank or financial institution are appropriate and, if so, whether they are complied with,
(b) To cause internal audit of the accounts and books of the bank or financial institution to be conducted and to ascertain whether such documents have been properly prepared in accordance with the prevailing law, regulations and directives of Nepal Rastra Bank,
(c) To examine or cause to be examined the regular managerial and operational performance of the management and operation of the bank or financial institution to be assured that the prevailing law applicable to the bank or financial institution is fully complied with,
(d) To monitor whether activities are carried out in accordance with this Act or the rules, regulations, policies made under this Act or directives issued thereunder, and submit a report thereof to the board of directors,
(e) To recommend the names of three auditors for the appointment of an external auditor,
(f) To provide opinions on matters requested by the board of directors. 62. Audit: (1) A bank or financial institution shall prepare its annual financial statements including the balance sheet, profit and loss account in the format and manner prescribed by Nepal Rastra Bank and get them externally audited within four months of the end of the fiscal year. Such financial statements shall bear the signatures of at least two directors, the chief executive and the auditor. Provided that, regarding the audit of a branch office of a foreign bank or financial institution licensed to conduct banking and financial business with the approval of Nepal Rastra Bank, the audit shall be as prescribed by Nepal Rastra Bank.

(2) If a bank or financial institution is unable to get the audit done within the period under sub-section (1), it may request an extension of the audit period stating reasonable grounds, and Nepal Rastra Bank may grant an extension of a maximum of two months.

(3) The external auditor shall submit the audit report to the concerned bank or financial institution and to Nepal Rastra Bank. 63.
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63. Appointment and remuneration of auditor: (1) The auditor shall be appointed by the general meeting of the bank or financial institution.

(2) The general meeting shall not appoint the same auditor for more than three consecutive terms.

(3) When appointing an auditor under sub-section (1), in the case of a bank or financial institution licensed under "Ka", "Kha" and "Ga" class, a chartered accountant shall be appointed, and in the case of a bank or financial institution licensed under "Gha" class, a chartered accountant or a registered auditor shall be appointed.

(4) If a bank or financial institution fails to appoint or cannot appoint an auditor under sub-section (1), Nepal Rastra Bank may appoint an auditor.

(5) If the position of auditor becomes vacant for any reason, the board of directors shall appoint another auditor for the remaining term.

(6) The remuneration of the auditor of a bank or financial institution shall be as prescribed by Nepal Rastra Bank if appointed by Nepal Rastra Bank, by the general meeting if appointed by the general meeting, and by the board of directors if appointed by the board of directors. 64. Persons not eligible for appointment as auditor: (1) The following persons, or a firm, company or institution in which such a person is a founder or partner, shall not be eligible for appointment as auditor of a bank or financial institution:

(a) A founder, director, chief executive of the bank or financial institution, or a member of his/her family,
(b) An officer, employee or internal auditor of the bank or financial institution,
(c) A person who has worked in partnership with a director, chief executive or employee of the bank or financial institution,
(d) A borrower of the bank or financial institution, a person having substantial ownership or a related person or a person having financial interest,
(e) A person declared insolvent in Nepal or abroad,
(f) A person, firm, company or institution holding one percent or more shares of the concerned bank or financial institution,
(g) A person who has been convicted of a criminal offence by a court and from whose sentence a period of five years has not elapsed,
(h) A person disqualified from being appointed as an auditor under the prevailing law.

(2) If a person appointed as auditor of a bank or financial institution is found to be disqualified under sub-section (1), the appointment of such person shall be deemed automatically revoked. 65.
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Provided that an infrastructure development bank and a bank or financial institution shall not merge, amalgamate or acquire with each other.

(3) Notwithstanding anything contained elsewhere in this Chapter, if, from the inspection and supervision report of Nepal Rastra Bank, a bank or financial institution is found to be in any of the following conditions, Nepal Rastra Bank may, stating the reason, order such bank or financial institution to merge or amalgamate its assets, liabilities and business with another bank or financial institution:

(a) Capital fund is inadequate or financial condition has been deteriorating for the past three years,
(b) It has done or is in a condition that adversely affects the interest of depositors and the liability towards depositors,
(c) It is necessary for the stability, development and promotion of the financial system and to enhance competitiveness at the national and international levels.

(4) Notwithstanding anything contained elsewhere in this Chapter, if, from the inspection and supervision report of Nepal Rastra Bank, a bank or financial institution is found to be in any of the following conditions, Nepal Rastra Bank may, stating the reason, issue necessary directives or suggestions for the acquisition of or by the bank or financial institution:

(a) More than one bank or financial institution of persons, firms, companies of the same group are operating and maintaining unhealthy financial relations,
(b) It appears that the interests of depositors, general shareholders, and other customers cannot be protected due to the negative impact of operating the bank or financial institution in its existing state,
(c) Systemic risk is increasing and licensed institutions are not able to pay their liabilities,
(d) Shares have not been issued to the general public within the stipulated time, issued shares have not been sold or distributed, or the prescribed minimum proportional paid-up capital has not been achieved,
(e) The institution has been subject to prompt corrective action three times or more, or the governance condition has weakened due to frequent disputes in the board of directors of the licensed institution.

(5) When ordering a bank or financial institution to merge, amalgamate or acquire pursuant to sub-section (3) or (4), Nepal Rastra Bank may also prescribe the procedure thereof. 70.