Summary of Directive 5 (Provisions Relating to Mitigation of Risks in Transactions of Licensed Institutions)
conferred by Section 79
5.1 Risk classifiaction
5.2 Arrangement for
Minimization of Liquidity Risks
5.3 Arrangement for
Minimization of Interest Rate Risks 1. Means for Risk Minimization
(a) Liquidity risks
(b) Interest Rate risks
(c) Foreign Exchange risks
(d) Credit and Investment risks
(e) Operation risks
1.Directives Form No. 5.1 prepared quarterly and be
submitted, within 15
days from the closure of the quarter for supervision
2.Classify Assets and liabilities having
maturity period 1. upto 90 days
2. 90-180 days
3. 180-270 days
4. 270-365 days
5. more than a year
4. no fixed maturity period(CD & SD), amount of
Core Deposits and the minimum required balances to be
included under the time interval of "over 1 yr"
*5.total loan and advance <= 80 % of resource mobilization
(local deposit and core capital) However,
*6. CCD Ratio (….) -Credit/ Resource Mobilization Ratio > caln daily from 2074/1/
> if limit is crossed, sec 99
(a) Only interest sensitive
change in interests rate h
(b) Generally, in the gap a
which mismatch no amou
Account" shall be include
(c) In order to manage an
institutions shall prepare
format Directives Form N
submit within 15 days fro

5.4 Arrangement for Minimization
of Foreign Exchange Risks
concerned Supervision De
2. monitoring interest rate risks, classification of the time
interval
shall be made per Sub-Clause 2 (2)
*3. Assets and Liabilities w/o Fixed Maturity Period a. Assets w
b. Liabilit
4. Gap shall be measured as follows:- (a) The gap between asse
total liabilities from the to
gap may be positive or ne
(b) For the purpose of min
each time interval shall al
by summing the individua
consideration.
(c) Possible changes in int
generally the effect that m
percent may be considere
(d) The expected change i
shall be adjusted to each
change (IRC) shall be multi
=Days in the time interval
For instance, where intere
days time interval,
Interest Rate Change (IRC
(e) With a view to examin
change in interest rate, th
multiplied by the interest
(1) For the purpose of monitoring the effect in the financial position of the licensed
institutions owing to possible changes in the foreign exchange rates, the licensed
institutions shall submit particulars according to the enclosed format Directives
Form No. 5.3 on weekly basis within seven days from the closure of the week, to
the concerned Supervision Department of this Bank.
(2) In order to minimize the risk arising from changes in foreign exchange rates, the
licensed institutions shall maintain an Exchange Fluctuation Fund as required
under the Directives relating to Accounting Policies and Format of Financial
Statements issued by this Bank.
(3) The licensed institutions shall group the currency-wise foreign exchange into
short-term and long-term maturity periods and exhibit the net position under both
the categories.
Explanation: For this purpose, "short-term" is defined to cover a period of one
month or less.
(4) The limit of licensed institution's daily net position of foreign exchange has been
fixed up to maximum of 30 percent of the Core Capital. Where the net position
exceeds such limit, the respective licensed institution shall put efforts to bring
down the same to the limit. In case the net position is not adjusted to the limit

5.5 Provisions for Minimization
of Credit and Investment Risks
*5.6 Provisions for Minimization
of Operational Risks
*5.7 Risk Management Guidelines
*5.8 Stress Testing Guidelines
5.9 Repeal and Saving
within one month, action under Nepal Rastra Bank Act, 2002 shall be initiated.
For the purpose of calculation of net position, the foreign currency deposit
liability and the amount under Forward Exchange Contract sales/purchase deals
shall also be adjusted.
Directives No. 2, Directives No. 3, Directives No. 8 shall be considered basis for minimizati
> - effective ICS and Information System
- Int Aud report shall comment/ feedback on the sufficiency
of measures to effectively manage operational risks in every
Branch/Dept./Office
> - ITG(IT guidelines) for effective operational risk minimization in IT & manage its inspecti
"IT Audit extra note"
> For "A" grade banks to manage risks
> For "A" grade Banks, national level "B" &"C" grade B/FI
for regular stress testing > Discuss about the result
> Spreadsheet prepared N
> submitted after the end
1. upto 90 days
2. 90-180 days
3. 180-270 days
4. 270-365 days
5. more than a year

1. deduct B/Fis' punarkarja from total loan and advance

2. include in resource
mobilization { Debn (>=5yrs) in
local currency
foreign B/FI long term Loan on
foreign currency (>=3yrs)}
3. include in resource mobilization (loan and advances from loan in NRs. from GON or intl org >= 3 yrs
4. prov for upto Asadh 2074 (redn in total loan and advance)
5. Inter-Bank Deposit not included in resource mobilization in caln of CCD Ratio
> caln daily from 2074/1/1
> if limit is crossed, sec 99 (NRB act) damages penalty
Study note in Directive for CCD caln

(a) Only interest sensitive assets and liabilities that may be affected due to change in interests rate have to be included in assets and liabi
change in interests rate have to be included in assets and liabilities.
(b) Generally, in the gap analysis of the assets and liabilities the maturities of
which mismatch no amount of the "Cash Balance" and "Non-Interest Bearing
Account" shall be included.
(c) In order to manage and minimize the interest rate risk, the licensed
institutions shall prepare quarterly statement according to the enclosed
format Directives Form No. 5.2 (end of Asoj, Paush, Chaitra and Ashad), and
submit within 15 days from the closure of the quarter to this Bank’s
 concerned Supervision Department.

> "Floating rate loan with interest adjusted periodically" shall be included in the time interval when the interest is adjusted
> short term loan depending on certain sp. Intt rate shall be included in the shortest time interval
> Interest sensitive, Floating Rate Liabilities are included in time period when the intt rate are adjusted
(a) The gap between assets and liabilities shall be measured by subtracting the
total liabilities from the total assets pertaining to each time intervals. Such
gap may be positive or negative both.
(b) For the purpose of minimizing the interest rate risk, the cumulative gap of
each time interval shall also be measured. The cumulative gap is measured
by summing the individual gaps up to and including the gap under
consideration.
(c) Possible changes in interest rate shall be estimated. For this purpose,
generally the effect that may arise from changes of interest rates by one
percent may be considered.
(d) The expected change in interest rate estimated according to Sub-clause (c)
shall be adjusted to each of the time interval. For this purpose, interest rate
change (IRC) shall be multiplied by the following ratio:
=Days in the time interval/365 days.
For instance, where interest rate is changed by 1 percent, in the case of 90
days time interval,
Interest Rate Change (IRC) = 90/365 X 0.01 = 0.0025
(e) With a view to examine the effect on profitability of the bank on account of
change in interest rate, the Cumulative Gap of various time intervals shall be
multiplied by the interest rate determined per Sub-clause (d).

sition of the licensed

rates, the licensed
ormat Directives
re of the week, to

exchange rates, the

nd as required
t of Financial

gn exchange into
position under both

a period of one

n exchange has been

the net position
efforts to bring
sted to the limit
hall be initiated.
ency deposit
s/purchase deals

idered basis for minimization of risk

in IT & manage its inspection and supervision

> Discuss about the results of stress testing based on quarterly FS on BOD meeting and top mgmt meetings on every quarter
> Spreadsheet prepared NRB can be used for stress testing
> submitted after the end of quarter within 30 days
e included in assets and liabilities.
n the interest is adjusted
n every quarter
Summary of Directive 20 (Provisions Relating to Subsidiary Companies)
conferred by Section 79

20.1 Provisions relating to class 'D'

1. In case licensed institution of class 'A', 'B', and ' 1.1 According to the policy of exemp
Micro Finance Company
micro finance institution and to advance loan to t limit of share investment of an undi
subsidiary company, it may do so having followed thgroup of companies case of class 'D'
provisions:- transaction being incorporated as a
of licensed institution of 'A', 'B' or 'C
licensed institution) may be 51% of
maximum.
1.2 While submitting its financial sta
statements of the subsidiary compa
consolidated manner. For that purp
statement shall have to be submitte
schedules of Directive No. 4. Moreo
technology and other policies/proce
consistent with that of the parent co
1.3 The licensed institution of class
adequacy of itself and that of the su
consolidated manner as well. The ca
manner shall have to comply with th
the financial institution of the conce
'A', 'B', 'C' and 'D' respectively).
1.4 The transaction to be carried ou
company shall have to be based on
maintain transparency in the transa
company and subsidiary company, b
between them under the head of re
financial interests in such transactio
1.5 After having such transaction, de
financial statements to be published
carried out on the arms length and/
not published according to Directive
according to Chapter 11 of the Nepa
1.6 The following provisions to be m
'A', 'B' and 'C' of the Directive No. 14
establishment/operation of Branch/
purpose of incorporating a subsidiar
a. Having maintained the minimum
provisions and Directives of this Ban
b. Having maintained the capital fun
statement of the immediately prece
c. Not having the non-performing lo
immediately preceding quarter.
2. The class 'D' licensed financial ins
(subsidiary company) shall have to s
 public according to the existing prov
3. Since the subsidiary company car
as a class 'D' financial institution, the
extended by Class 'A', 'B' and 'C' ban
financial institution (subsidiary com
sector lending according to the Dire
4. In order to promote deprived sec
capital fund by deducting the amou
financial institution from the core ca
Moreover, even in case of establish
class D financial institution to be en
incorporated as a subsidiary compa
provision of deducting from core ca
the corporate bodies having financia
5. According to the policy of mainta
limit of share investment of an undi
or a group of companies in case of c
finance transaction, if it is requested
class 'A', 'B' or 'C', exemption shall b
investment.
6. Since such subsidiary company of
has the existence of a separate licen
inspection, supervision and other pr
Financial Institutions Act, 2073 and
*7. no licence for subsidiary "D" gra

20.2 Provisions Relating to

Licensed A, B & C can inincorporate a subsi co.
Incorporation of subsidiary company
to carry out under its equity after approval from SEBON under 1.investment in subsi co. shall be re
current policy and other legal provision for
functions relating to Merchant
Merchant Banking with atleast 51% ownership
Banking
provision that, "Similarly while inves
bodies by licensed institution, inves
according
not exceedto10%
the of
policy, Directives
the paid a
up capit
Securities Board. This provision
that purpose, accounting policy and shal
maintain
prescribedtransparency in theadditio
in the concerned transa
company and subsidiary company,
financial statements to be published b
between
carried them
out under
on the thelength
arms head and/
of re
published according
7. Subsidiary company to shall
Directives, fi
not carr
(a) Business relating to s
(b)company
8. The parent Sales of securities iss
shall not be
issued by subsidiary company as liab
resources andany
9. to convert shall
Co.not advance loa
performing me
a. approval from NRB
b. following docs for app
20.3 Repeal & Saving
ing to the policy of exempting at 25% of the paid up capital in the maximum
re investment of an undivided family/firm/company or corporate body or a
ompanies case of class 'D' financial institution to carry on micro finance
n being incorporated as a subsidiary company the promoters share ownership
institution of 'A', 'B' or 'C' class in its subsidiary company (Class 'D'
stitution) may be 51% of the paid up capital in minimum and 70% in the

ubmitting its financial statements by the parent company, the financial

s of the subsidiary company shall also have to be submitted in a
ed manner. For that purpose, accounting policy and financial
shall have to be submitted as prescribed in the concerned additional
of Directive No. 4. Moreover, accounting policies, information
and other policies/procedures and system shall have to be made in
with that of the parent company.
ensed institution of class 'A', 'B' and 'C' shall have to calculate the capital
of itself and that of the subsidiary company separately and in
ed manner as well. The capital fund to be calculated in consolidated
all have to comply with the norms and directives to be prescribed for
al institution of the concerned class (10, 11, 11 and 8 percent for class
and 'D' respectively).
nsaction to be carried out between the parent company and subsidiary
hall have to be based on the arm's length transaction. In order to
ansparency in the transaction to be carried out between the parent
nd subsidiary company, both parties shall disclose the transactions
hem under the head of related party transaction since both of them have
terests in such transactions.
aving such transaction, details of such transaction have to be given in the
atements to be published regularly in the case the transactions are not
on the arms length and/or details description of such transaction are
hed according to Directives, fine punishment shall be imposed
o Chapter 11 of the Nepal Rastra Bank Act, 2002.
owing provisions to be made by the financial institution of the classes
'C' of the Directive No. 14 issued by this Bank with regard to
ent/operation of Branch/ offices shall be applicable also for the
incorporating a subsidiary company:
maintained the minimum paid up capital prescribed by policy
and Directives of this Bank;
maintained the capital fund prescribed by this Bank in the financial
of the immediately preceding month;
ng the non-performing loan more than five percent in the
ly preceding quarter.
s 'D' licensed financial institution operating micro finance transaction
company) shall have to sell at least 30 percent of the shares to general
ording to the existing provisions.
e subsidiary company carrying out micro-finance transaction is to remain
D' financial institution, the promoter share investment and credit
by Class 'A', 'B' and 'C' banks and financial institutions in the class 'D'
stitution (subsidiary company) shall be calculated as the deprived
ing according to the Directives of this Bank.
to promote deprived sector lending, the existing provision of maintaining
d by deducting the amount of share investment in such class 'D' licensed
stitution from the core capital has been exempted for this purpose.
even in case of establishment of financial interest upon investment in
ncial institution to be engaged in micro-finance transaction after being
ed as a subsidiary company, there shall be an exemption in the existing
f deducting from core capital the amount of share investment made in
ate bodies having financial interests.
ng to the policy of maintaining 25% of the paid up capital in the maximum
re investment of an undivided family/firm/company or corporate body
of companies in case of class 'D' financial institution to carry on micro
nsaction, if it is requested from the banks and financial institutions of
' or 'C', exemption shall be granted in the limit of such share

ch subsidiary company of class 'D' proposed for micro-finance transaction

stence of a separate licensed financial institution of class 'D', regulation,
supervision and other provisions shall be according to the Banks and
nstitutions Act, 2073 and other existing provisions.
nce for subsidiary "D" grade except for establishing it with central/ main office in Districts(9 refer dir) w/o banking service along with other

nt in subsi co. shall be reduced from Core Capital in caln (capital fund)

hat, "Similarly while investing in shares and debentures of corporate

icensed institution, investment shall be made in such limit that it may
o10%
the of
policy, Directives
the paid and of
up capital other
the existing provisions
institution in whichdetermined by Nepal
the investment
Board.
se, accounting policy and financial statement shall have to be submittedRastra
This provision shall not be deemed to have prohibited the Nepal as
ansparency in theadditional
in the concerned transaction to be carried
schedules out between
of Directive No. 4. the parent accounting
Moreover,
nd subsidiary
atements to becompany,
published both partiesinshall
regularly disclose
the case the the transactions
transactions are not
hem under
on the thelength
arms head and/or
of related party
details transaction
description ofsince
such both of themare
transaction have
not
according to Directives, fine punishment shall be
ry company shall not carry out the following functions:- imposed according to
(a) Business relating to securities brokerage
(b)company
ent Sales of securities issued
shall not be by itself.
allowed to invest in any of the securities to be
ubsidiary company as liability with the objective of collecting financial
and shall
rt any Co.not advance loan
performing against
merchant the mortgage
banking run intoofSubsidiary
such securities.
Co. by licensed institution by purchase/ invst. , following provisions
a. approval from NRB
b. following docs for application for approval
> decision by both institutions to make subsi Co.
> MOU (Memorandum of Understanding) if any
> evaluation report of fixed and current assets and liabilities with recent actual details of proposed subsi co.
> basis for investment determination/assessment & photocopy of its decision
> recent discal year's audited B/S, P/L Statement, CFS & other financial details
 service along with other districts

wing provisions
Summary of Directive 9 (Provisions Relating to Filing of Statistical Returns)

Licensed Institution A, B & C shall prepare returns as per

clause no. 2 in Excel and send e-mail to respective depts.
As mentioned in clause no. 5 and perform Posting or
Uploading the returns as per clause no. 4 after logging in in
9.1 the web address
Licensed Institution A, B & C shall prepare prescribed
consolidated returns (incl. their branches) and send to the
9.2 regulatory depts., supervisory depts.

2
note: the returns mentioned in the table in annexure 1 of
this directive sshall be send to the resp. dept. within the
time period mentioned in that table 3

the returns of statistics to be sent as per clause 2 shall be

prepared as per the format in the NRBs website, if
applicable or in separate excel sheet. The prescribed
9.3 format shall not be changed.
Licensed Institution A, B & C shall prepare prescribed
consolidated returns (incl. their branches) and perform
9.4 Online Repoting through NRB's website

4
Posting in the format in website as per the Directive Form
No. 9.13 regarding Interbank transaction with the office
9.5 time of the same date
The afore-said statistics shall also have to be sent to the
9.6 following e-mail addresses of this Bank: Licensed Inst.

A
 A

Licensed Institutions shall provide the information

regarding the official appointed(name, contact no. and e-
mail address) for sending the statistical returns and
mention the same in the returns sent. The official
9.7 appointed shll be liable fot the punishment as well
If the licensed institution fail to send or send false returns,
fine between 10 to 25 thousands can be charged as per
9.8 NRB Act, 2058 and BAFIA 2074

9.9 Repeal & Saving 1

2
Returns as per Dir. Form no. 8.1, 8.2, 8.3, 15.1, 15.2 and 17.1 in
monthly basis within 15 days of end of the month
Returns as per Dir. Form no. 2.5 quarterly within 15 days of end
of the quarter

Returns as per Dir. Form no. 17.2 and 17.3 semi-annnually

within 15 days of end of th transaction
Respective Statistical return as demanded by the related
supervisory dept. in Hard Copy with authorization of the officer
shall be sent

> A class B/FI - Rs. In Million

> B class B/FI - Rs. In thousand
> compulsory in BISHALL font

Upload the return as per the format in the website as per

Direction 3.10 regarding Top Borrowers quarterly within one
month of the end of the quarter

Posting in the format in website as per the Annexure 6.4

regarding the BOD and CEO (name, surname, address and other
information) in the date of appointment and end of their term
Upload the return in website as per Directive Form no. 9.14 of
quarterly financial information and Directive Form no. 9.15 of E-
banking information within 15 days

Upload the return in website as per Directive Form no. 9.16

information about the central, branch and other offices, date of
its operation/dismissal operation and branchwise loan/ deposit
within 7 days of end of the month

Departments e-mail address

Banks and Financial Institutions Regulation Department bfistata@nrb.org.np
Banks Supervision Department bsdoffsite@nrb.org.np
Investigation Department researchreportcb@nrb.org.np
Banks and Financial Institutions Regulation Department bfistatb@nrb.org.np

Development Banks Supervision Department fsidreportsdb@nrb.org.npnrbdbsdstat@nrb.org.np

Investigation Department researchreportcb@nrb.org.np
Banks and Financial Institutions Regulation Department bfistatc@nrb.org.np
Financial Institutions Supervision Department fsidreportsfc@nrb.org.np
Investigation Department researchreportcb@nrb.org.np

Provisions relating to submission of statistics and detail

description by licensed institution to Nepal Rastra Bank, the
Directives under Directive No. 9/073 and all circulars relating to
the matters issued until Shrawan 9, 2074.

Actions taken under the Directives repealed pursuant to sub-

clause (1) shall be deemed to have taken under these Directives.