Banks and Financial Institutions Act, 2017

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. Bank or financial institution may conduct banking and financial transactions: (1) Subject to this Act, the memorandum and articles of association, and the limits, conditions or directives prescribed by the Nepal Rastra Bank, a class "ka" bank may conduct the following banking and financial transactions: -

(a) Accept deposits with or without interest or mobilize deposits through various financial instruments, and make payments thereof,

(b) Accept deposits, make payments, conduct transactions, perform intermediation and remit funds through electronic devices or means,

(c) Grant loans including hire purchase, leasing, housing, overdraft,

(d) Grant loans against project and hypothecation mortgage, and arrange for granting loans jointly under an agreement among themselves on the basis of co-financing with pari passu sharing of collateral,

(e) Grant loans against the guarantee of a foreign bank or financial institution,

(f) Grant loans up to the amount covered by the value of movable and immovable property already mortgaged with it, or grant loans up to the amount covered by the value of movable and immovable property already mortgaged with another bank or financial institution under a re-mortgage,

(g) Issue letters of guarantee on behalf of its clients, make necessary conditions with the client therefor, take mortgage of his/her movable and immovable property or take guarantee of a third person, and acquire, hold and conduct other related transactions of the property taken as security,

(h) Obtain refinance from the Nepal Rastra Bank as needed, or obtain from or grant loans to other banks or financial institutions,

(i) Provide loans or manage loans from funds received through the Government of Nepal or other domestic or foreign bodies for the promotion of projects,

(j) Write off loans subject to the prevailing loan write-off regulations,

(k) Issue shares, debentures, bonds, etc., for the purpose of meeting the capital fund requirement,

(l) Issue, accept, pay, discount or buy and sell letters of credit, bills of exchange, promissory notes, cheques, traveler's cheques, drafts or other financial instruments,

(m) Issue, accept, manage and appoint agents for performing related functions for digital or card-based financial instruments for electronic transactions,

(n) Conduct foreign exchange transactions subject to the prevailing law,

(o) Conduct government transactions as per the limits, conditions or directives prescribed by the Nepal Rastra Bank,

(p) Buy, sell or discount bonds issued by the Government of Nepal or the Nepal Rastra Bank,

(q) Send or remit funds within Nepal or abroad by bills of exchange, cheques or other financial instruments, receive remittances from abroad and make payment thereof,

(r) Act as a commission agent on behalf of clients to underwrite, buy and sell shares, debentures or securities, collect dividends on shares, interest on debentures or securities, etc., and send such dividends, profits or interest within Nepal or abroad, provide safe deposit vault facilities for clients,

(s) Conduct off-balance sheet transactions,

(t) Grant loans up to the amount prescribed by the Nepal Rastra Bank on personal or group surety for the economic upliftment of the underprivileged class, low-income families, victims of natural disasters, and residents of any region of the country,

(u) Obtain from and provide to the Nepal Rastra Bank, concerned body or other banks or financial institutions, details, information or knowledge of borrowers or clients taking loans or any kind of facility from itself and other banks or financial institutions,

(v) Buy and sell gold and silver,

(w) Conduct or cause to conduct studies, research, surveys relating to project establishment, operation and evaluation, and provide training, consultancy and other information,

(x) Properly manage and sell all kinds of property that come under its ownership under this Act and the prevailing law,

(y) Provide guarantee by agreement of both parties to arrange for payment of amounts payable or receivable in respect of any transaction between two or more persons under the prevailing law, after such transaction is completed,

(z) Perform other functions prescribed by the Nepal Rastra Bank.

(2) Subject to this Act, the memorandum and articles of association, and the limits, conditions or directives prescribed by the Nepal Rastra Bank, a class "kha" financial institution may, in addition to the banking and financial transactions mentioned in clauses (ka), (kha), (ga), (cha), (ja), (jha), (ña), (ṭa), (ṭha), (ḍha), (ta), (da), (dha), (na), (pa) and (bha) of sub-section (1), also conduct the following other banking and financial transactions: -

(a) Grant loans against project mortgage, arrange for granting or causing to grant loans jointly under an agreement among themselves on the basis of co-financing with pari passu sharing of collateral,

(b) Issue letters of guarantee on behalf of its clients, make necessary conditions with the client therefor, take mortgage of his/her movable and immovable property or take guarantee of a third person,

(c) Issue, accept, pay, discount or buy and sell bills of exchange, promissory notes, cheques, traveler's cheques, drafts,

(d) Obtain loans against mortgage of its own movable and immovable property,

(e) Conduct letter of credit and remittance transactions with prior approval of the Nepal Rastra Bank

(ग) To provide any kind of loan or facility to a director, a person holding one percent or more of the paid-up capital, the chief executive or a member of the family of such person, or a managing agent, or any firm, company or institution in which a person authorised to nominate a director has substantial ownership or financial interest,

(घ) To provide a loan or facility to the same customer, company, companies within the same group or partnership firm, or related person, exceeding the per-customer limit prescribed by Nepal Rastra Bank based on its capital fund,

(ङ) To provide any kind of loan to any person, firm, company or institution against the guarantee of a founder, director or chief executive,

(च) To invest in securities of banks or financial institutions classified as "Ka", "Kha" and "Ga" class by Nepal Rastra Bank,

(छ) To invest an amount exceeding the limit prescribed by Nepal Rastra Bank in the share capital of other institutions,

(ज) For banks or financial institutions to collude to establish any kind of monopoly or any other type of restrictive practice in financial transactions,

(झ) To commit any act with the intention of gaining undue advantage that artificially impedes the competitive environment of the financial sector,

(ञ) To perform other acts as may be prescribed by Nepal Rastra Bank from time to time as acts not to be done by a bank or financial institution.

(2) Notwithstanding anything contained elsewhere in this Act, providing housing or other facilities to employees in accordance with the prevailing employee by-laws of the bank or financial institution for conducting its banking and financial operations, providing credit against the security of debt instruments issued by the Government of Nepal or Nepal Rastra Bank, deposits in any deposit account or fixed deposit receipts, and providing credit against the security of the bank's own fixed deposits or debt instruments issued by the Government of Nepal or Nepal Rastra Bank, and providing credit card facilities up to the prescribed limit to founders, directors, chief executives or shareholders holding more than one percent shares, shall not be deemed to constitute a hindrance.