Banks and Financial Institutions Act, 2073

(Unofficial Translation)

An Act Made to Amend and Consolidate Legislation Relating to Banks and Financial Institutions

Preamble: Whereas, it is expedient to amend and consolidate forthwith the prevailing legislation
relating to banks and financial institutions and make it timely in order to promote the trust of the
general public in the overall banking and financial system of the country and protect and
promote the rights and interests of depositors, provide quality and reliable banking and financial
intermediary services to the general public through healthy competition among banks and
financial institutions, minimize risks relating to the banking and financial sector, boost and
consolidate the economy of the State of Nepal by liberalizing the banking and financial sectors
and make necessary legal provisions relating to the establishment, operation, management and
regulation of banks and financial institutions;

Now, therefore, this Act is enacted by the Legislative Parliament pursuant to sub-article (1) of article 296
of the Constitution of Nepal.
Chapter - 1
Preliminary

1. Short title, extension and commencement: (1) This Act may be called "Banks and Financial
Institutions Act, 2073".
(2) It shall extend to the whole of the State of Nepal and also apply to all offices opened
anywhere outside the State of Nepal by banks or financial institutions.
(3) It shall come into force immediately.

2. Definition: In this Act, unless the subject or the context otherwise requires,-
a) "Court" means the commercial bench of a court specified by the Government of
Nepal by a notification in the Nepal Gazette, with the consent of the Supreme
Court.
b) "Chairperson" means the chairperson of the Board and this term also includes
executive chairperson.
c) "License" means the license issued by the Rastra bank to a bank or financial
institution to carry on financial transactions, pursuant to this Act.
d) "Licensed Transaction" means the banking or financial transactions carried on by
a bank or financial institution which has obtained license, pursuant to this Act.
e) "Licensed institution" means a bank or financial institution which has obtained
the license to carry on financial transactions pursuant to this Act.

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f) "Significant ownership" means a situation where a person or an institution
individually or jointly with other persons or institutions holds 2% or more than
2% of paid up capital of any banks or financial institutions or a situation where
there is influence over the management of banks or financial institutions because
of the share ownership.
g) "Borrower" means those persons, firms, companies or institutions who have
borrowed loan from banks or financial institutions.
h) "Credit" means supply of funds to persons, firms, companies or institutions by
banks or financial institutions and in return therefore, the right to receive
principal, interest or other charges within a fixed period, a direct or indirect
commitment, interest or other charges of credit, restructuring and renewal of a
credit, security issued for the repayment of such credit including other
commitment made for such repayment and this term also includes any credit in
whatever form, as specified by Rastra Bank through publication of public notice.
i) "Chief Executive" means the chief executive officer assigned with responsibility of
operation of a bank or financial institution and this term also includes executive
chairperson and managing director working as the chief executive of a bank or financial
institution.
j) "Office" means the central or registered office of a bank or financial institution and this
term includes branch office of banks or financial institution in or outside Nepal or branch
office of foreign banks or financial institutions in Nepal.
k) "Net Worth" means the amount obtained after deducting outside liability from total assets
shown in balance sheet of a bank or financial institution.
l) "Non-Executive Director" means other directors, besides executive director involved in
daily operational work of a bank or financial institution.
m) "Current Account" means an account of funds deposited with a bank or financial
institution as may be withdrawn at any time required by the customer.
n) "Paid-up Capital" means the portion of capital, paid by the shareholder out of the issued
capital of a bank or financial institution.
o) "Risk-weighted Assets" means the total assets calculated by multiplying the amounts
coming under each heading of on-balance sheet and off-balance sheet operations of a
bank or financial institution by the risk-weight prescribed by the Rastra Bank.
p) "Liquid Assets" means the cash balance of a bank or financial institution, the balances
held in current account, the balance maintained in the Rastra Bank and such assets of a
bank or financial institution prescribed as liquid assets by the Rastra Bank from time to
time.
q) "Prescribed" or "as prescribed" means prescribed or as prescribed in the rules or bye-laws
framed under this Act.
r) "Securities" means any shares, stocks, bonds, debentures, debenture stocks or collective
investment scheme certificate issued by a bank or financial institution or a body corporate
or certificate, saving bonds or bonds issued by the Government of Nepal or by a body
corporate against the guarantee of the Government of Nepal, and this term also includes
such other securities as may be specified by the Securities Board to be transacted or
transferable through stock exchange or the instrument to purchase, sell or exchange such
securities.
s) "Articles of Association" means the articles of association of a bank or financial
institution prepared as per prevailing law related to company.

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t) "Deposits" means amounts deposited through customer in current, savings or fixed
accounts, taking interest or without interest, of a bank or financial institution, and this
term also includes such amounts a bank or financial institution accepts through such
various financial instruments as prescribed by the Rastra Bank from time to time.
u) "Security Deposit f" means security of deposit as well as + task done for security of such
deposit as referred to in section 108.
v) "Officer" means the director, chief executive, company secretary and any officer level
employee having the authority to make decision on any subjects.
w) "Family" means the director's husband or wife, son, daughter-in-law, daughter, adopted
son, adopted daughter, father, mother, step-mother and elder brother/sister-in-law,
younger brother/sister-in-law, elder sister/younger sister to be maintained by him or her.
But the term does not include family members doing their own occupation/business
living separately after partition.
x) "Capital" means the authorized capital, issued capital or paid up capital of a bank or
financial institution.
y) "Capital Fund" means the total of primary and supplementary capital of a bank or
financial institution as prescribed by Rastra Bank and this term includes any other fund of
the institution as prescribed as such by the Rastra Bank from time to time.
z) "Infrastructure Development Bank" means infrastructure development bank established
to do financial transactions as referred to in sub-section (5) of section 49.
aa) "Letter of Credit" means a letter written by one bank or financial institution to another
bank or financial institution authorizing the latter to accept cheques, drafts, or bills of
exchange of any specified person within the limit of the amount specified therein.
bb) "Memorandum of Association" means the memorandum of association of a bank or
financial institution as per prevailing law related to companies.
cc) "Primary capital" means the funds of a bank or financial institution listed under such
headings as the paid-up capital, share premium, non-redeemable preference shares,
general reserve fund and accumulated profit and loss, and this term also includes such
other funds listed under other headings as may be prescribed as primary capital by the
Rastra Bank from time to time.
dd) "Acquirer Institution" means the main bank or financial institution that acquires the
licensed institution in it as per this Act.
ee) "Acquisition" means the process of acquiring a licensed institution by another licensed
institution on account of total assets and contingent liabilities resulting in the end of legal
status of the acquired licensed institution and this term also includes the acceptance of
contractual agreement entered by targeted institution before merger with acquirer
institution.
ff) "Saving Account" means an account of funds deposited by customer with a bank or
financial institution for saving purpose.
gg) "Bank" means a corporate body incorporated to carry on banking and financial
transactions as per sub-section (1) of section 49 and this term also includes branch offices
of foreign banks in Nepal, branch office of Nepalese bank outside Nepal and
infrastructure development bank conducting work as per sub-section (5) of section 49 and
its branches too.
hh) "Banking and Financial Transactions" means banking and financial transaction as
referred in section 49.
ii) "Bonus Share" means a share issued as an additional share to shareholders by capitalizing
the saving earned from the profits or other funds of a bank or financial institution and this
term also includes the increase of the paid-up value of a share by capitalizing the saving
or other funds.

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jj) "Fixed Account" means an account of funds deposited by customer with a bank or
financial institution ordinarily cannot withdraw the saving for a specified term.
kk) "Rastra Bank Act" means the Nepal Rastra Bank Act, 2058.
ll) "Ratra Bank" means Nepal Rastra Bank.
mm) "Targeted Institution" means the licensed institution to be acquired along with its total
assets and liabilities by acquirer institution as per this Act.
nn) "Audit Committee" means the audit committee as referred in section 60.
oo) "Dividend" means the cash dividend, interim dividend or bonus share given by a bank or
financial institution as per prevailing act and laws.
pp) "Liquidator" means the person appointed by order of court or as per proposal passed by
creditor's meeting for liquidation work of a bank or financial institution and this term also
includes office conducting liquidation work.
qq) "Leasing" means an agreement of right-to-use of current/non-current assets to customer,
owned by licensed institution, on installment basis for a fixed period of time.
rr) "Off-Balance Sheet Transactions" means transactions relating to letters of credit, letters
of guarantee, letters of acceptance, commitments, swaps, options and forward exchange
transactions for which a bank or financial institution may be required to bear liability and
this term also includes transaction of instruments as specified by Rastra Bank from time
to time.
ss) "Financial Institution" means a corporate body incorporated to carry on the transactions
as referred to in Sub-section (2), (3) or (4) of section 49, and this term also includes a
development bank, finance company, micro-finance institution or branches of foreign
financial institution in Nepal and this term also includes branches of Nepalese financial
institution in foreign.
tt) "Financial Interest" means a situation where ten per cent or more of the total paid-up
capital of any firm, company or corporate body is held by any promoter, director or chief
executive or shareholder holding one per cent or more of the shares or family member of
such person or any individual, company or corporate body empowered to nominate a
director, whether singly or taken together than interest of such person or persons owning
ten percent or more shares in an institution is deemed to has financial interest and this
term also includes interest in financial transaction as financial interest, considering its
nature and situation, as specified by Rastra Bank from time to time.
uu) "Branch of Foreign Bank or Financial Institution" means branch of a bank or financial
institution opened in Nepal for doing financial transaction after obtaining permission
from Rastra Bank as per Act.
vv) "Electronic Transaction" means the transaction of accepting deposits, making payment,
transferring funds through telephones, telex, computers or magnetic tapes or similar other
electronic equipment and this term includes transactions to be carried on through
terminal, automated teller machine and cash dispensing machine, also includes
transactions to be carried on through charge card, debit or credit cards.
ww) "Prospectus" means a prospectus to be published by a bank or financial institution
pursuant to section 8.
xx) "Branch Office" means branch, sub- branch, sub division, area, representative, or liaison
office of a bank or financial institution in or outside Nepal also, branch or representative
or liaison or any other office of foreign bank or financial institution in Nepal.
yy) "Share" means a division of the share capital of a bank or financial institution.
zz) "Shareholder" means a person having ownership in a share of a bank or financial
institution.
aaa) "Director" means a member of the Board, and this term also includes the chairperson and
an alternate director.

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 bbb) "Board of Director" means the board of directors formed pursuant to section 14.
ccc) "Promoter" means a person who, having consented to subscribe at least one share, signs
the memorandum of association and the articles of association for the establishment of a
bank or financial institution pursuant to this Act.
ddd) "Affiliate Person" means the director, officer or family member of such persons or
person, firms, company or institution or their beneficiary having significant ownership in
any firms, company or institution.
eee) "Independent Director" means a person appointed in the post of independent director
pursuant to subsection (3) of section 14.
fff) "Voluntary Liquidation" means voluntary liquidation of a bank or financial institution as
referred to in Chapter-11.
ggg) "Creditor" means person or corporate body to whom a bank or financial institution need
to pay and this term also includes depositors and debenture holders in case of liquidation
purpose.
hhh) "Hypothecation Loan" means the loan provided as per agreement between borrower and a
bank or financial institution against mortgage of goods stock, right-to-use of such stock
will be with borrower.

Chapter -2
Provisions relating to Incorporation of Banks or Financial Institutions

3. Incorporation of bank or financial institution: (1) A person who is desirous of incorporating a

bank or financial institution to carry on financial transactions pursuant to this Act may do so by
getting such bank or financial institution registered as a public limited company in accordance with
the laws in force.
But banks or financial institutions that are in operation before commencement of this Act, do not
have to register as per above sub-section.
(2) The authority empowered under the laws in force to register a company pursuant to Sub-
section (1) shall register the same subject to section (4).

4. Prior approval to be obtained to incorporate bank or financial institution: (1) For the purpose of
section (3), the concerned person or institution shall, before making an application for the registration
of the bank or financial institution pursuant to the laws in force, make an application, accompanied by
the following documents and the fee prescribed by the Rastra Bank, to the Rastra Bank for prior
approval:
a) Memorandum of Association of the proposed bank or financial institution,
b) Articles of Association of the proposed bank or financial institution,
c) Feasibility study report of the proposed bank or financial institution,
d) Personal details of the promoters in the form prescribed by the Rastra Bank,
e) A certified copy of the agreement, if any, entered into between the applicants prior to the
incorporation of bank or financial institution,
f) Description about applicant's source of investment and evidence of tax clearance up to the
fiscal year immediately preceding the making of application pursuant to this section,
g) Description about whether or not the applicant is insolvent in Nepal or in foreign, whether or
not loan taken from any bank or financial institution, whether or not black listed for any

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 transactions with bank or financial institution, if listed than whether 3 years has passed or
not,
h) Self-declaration that no action or punishment has been taken against applicant in Nepal or in
foreign for any fraud, forgery, or against any such activity that is treated as offence as per
prevailing Act,
i) Description about whether or not any actions has been taken against the applicant by any
regulatory body or supervision body in Nepal or in foreign, suspension or cancellation of
license of company or institution in which applicant is involved or such company or
institution is under compulsory liquidation or is in the process of compulsory liquidation,
j) Description about applicant's family member name, caste and relation as well as significant
ownership or significant status and description about whether they are directors in any
institution, working as an officer or employee along-with their designation, if any.
But, if the applicant is a corporate institution than description about person having
significant ownership or status holder in such institution, last three years audited financial
statement and tax clearance certificate of such corporate institution need to be attached.
k) Written authority issued to Rastra Bank, to investigate about applicant's financial and
professional background or exchange such information,
l) Commitment of security deposit to the extent prescribed by Rastra Bank,
m) Other description and papers as prescribed by Rastra Bank from time to time.

(2) If an application is made for prior approval pursuant to sub-section (1), the Rastra Bank shall,
if it finds appropriate to grant approval upon examination of the application and submitted
documents, grant its approval to incorporate such bank or financial institution within one hundred
twenty days after the making of application, with or without prescribing any conditions.
(3) Notwithstanding anything contained in sub-section (2), approval for incorporation of bank or
financial institution shall not be given to a firm or company whose significant ownership is with
following person or such person's family member:
a) Regulatory action taken by Rastra Bank,
b) Punished under banking offence,
c) Punished for cheating, fraud, forgery,
d) Punished for financial investment in money laundering and terrorist activities,
e) Punished for corruption related offence,
f) Punished for serious nature offence like human trafficking, kidnapping, rape.

5. Prior approval to be obtained for incorporation of foreign investment's banks or financial

institutions: If any foreign bank or financial institution makes an application for incorporation, under
this Act, of a bank or financial institution in joint investment with a corporate body incorporated in
Nepal or with a citizen, or as a subsidiary company subscribing shares as prescribed by Rastra Bank,
following additional documents and description should be submitted, along with the documents as
prescribed under sub-section (1) of section 4:
a) Copy of Memorandum of Association, Articles of Association of foreign bank or financial
institution, certificate of registration of foreign bank or financial institution in respective
nation and capital structure,

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 b) Copy of license, obtained for doing banking and financial transactions in respective nation, of
foreign bank or financial institution,
c) Detail about the principal place where it carries on its transactions,
d) Certified copy of last three years audited balance sheet and profit and loss account of foreign
bank or financial institution,
e) Proposed business plan, business strategy in Nepal and details regarding the types of
operation activities, internal control and risk management,
f) Decision, made as per prevailing law of respective nation, of foreign bank or financial
institution regarding incorporation of a bank or financial institution in Nepal, and authority
from respective nation regulatory body.

(2) If an application is made for prior approval pursuant to sub-section (1), the Rastra Bank shall,
if it finds appropriate to grant approval upon the examination of the submitted documents, grant its
approval to foreign bank or financial institution to make share investment within the prescribed limit
or joint investment in such bank or financial institution within one hundred twenty days.
(3) Foreign bank or financial institution on prior approval from Rastra Bank can have share
ownership in the form of joint investment in a bank or financial institution that is in operation, by
fulfilling the criteria prescribed by Rastra Bank.
(4) Notwithstanding anything contained in this Act, if any foreign bank or financial institution or
other foreign institution has made investment in a bank or financial institution and was duly approved
as per prevailing law before commencement of this Act than investment in such bank or financial
institution shall be in good-standing.

6. Prior approval to be obtained for opening branch office of a bank or financial institution: (1) If
any international rated foreign bank or financial institution wants to open branch office in Nepal for
doing banking and financial transaction or non-banking financial transaction than prior approval of
Nepal Rastra Bank is required for opening such branch office.
(2) For sub-section (1) purpose, an application needs to be submitted to Rastra Bank along with
capital and fee as prescribed by Rastra Bank.
(3) Foreign bank or financial Institution submitting application as pursuant to sub-section (2)
shall require to submit additional following documents and details as prescribed under sub-section (1)
of section (5):
a) Written commitment from Board of Directors declaring that the amount required in
fulfillment of the total liability, in relation to business work activities, of branch or
representative or liaison office of foreign bank or financial institution in Nepal shall be made
available at time as required by Rastra Bank,
b) Description of place where proposed branch office of foreign bank or financial institution will
be located,
c) Detail of possible officers of proposed branch office of foreign bank or financial institution.

(4) The Rastra Bank shall, if it finds requirement of additional document upon examination of
documents or details submitted as pursuant to sub-section (3), ask the applicant to provide necessary
documents or details.

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 (5) After receiving additional documents requested pursuant to sub-section (3) and documents
pursuant to sub-section (4) for prior approval, the Rastra Bank shall, if it finds appropriate to grant
approval upon the examination of the application, grant its approval to foreign bank or financial
institution to open branch office in Nepal within one hundred twenty days after the making of
application, with or without prescribing any conditions.
(6) After getting prior approval pursuant to sub-section (5), such foreign bank or financial
institution has to registered the branch office as per prevailing company law.
(7) For the purpose of doing banking and financial transactions, the branch office of foreign bank
or financial institution registered pursuant to sub-section (6) shall, make an application, accompanied
by the following documents and the fees or charges prescribed by Rastra Bank, to the Rastra Bank for
approval:
a) Registration certificate of branch office, registered pursuant to prevailing company laws for
doing baking and financial transactions in Nepal,
b) Approval or consent letter obtained, from government or central bank or regulatory entity, as
per law of respective nation of such foreign bank or financial institution, to open branch
office in Nepal by foreign bank or financial institution,
c) Description of any differences in the matters required to be fulfilled as per this Act, after
making an application to Rastra Bank for approval or after getting prior approval from Rastra
Bank for incorporation of branch office of a foreign bank or financial institution in Nepal, by
such foreign bank or financial institution,
d) Such other information and particulars as requested by Ratra Bank.

(8) The Rastra Bank shall, if it finds appropriate to grant approval upon the examination of the
application received pursuant to sub-section (7), grant its approval to branch office of such foreign
bank or financial institution to do banking and financial transactions, within ninety days.
(9) The Rastra Bank can prescribe necessary conditions while providing approval pursuant to
sub-section (8).
(10) Bank or Financial Institution can open branch office outside Nepal after getting approval
from Rastra Bank.
(11) Rastra Bank shall prepare necessary policy from time to time in relation to opening of branch
office pursuant to sub-section (10).

7. Power to refuse to grant prior approval: (1) The Rastra Bank may refuse to grant prior approval for
the incorporation of a bank or financial institution or to open branch office of foreign bank or
financial institution in any of the following circumstances;
a) If the name of the proposed bank or financial institution or the financial transactions to be
carried on by it appears to be undesirable in view of public interest, religion, nationalities or
communities,
b) If the objectives of the proposed bank or financial institution are contrary to the laws in force,
c) If the incorporation of the bank or financial institution seems to be technically inappropriate,
d) If a study of the feasibility study report, particulars and documents and information on other
infrastructures submitted by the proposed bank or financial institution does not provide a

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 ground to believe that it can carry on financial transactions in a healthy and competitive
manner,
e) If all the promoters of the proposed bank or financial institution have not signed the
memorandum of association and articles of association, also setting out their names,
addresses and number of shares to be subscribed by him or her, in the presence of any one
witness, and the name and address of the witness has not been set out,
f) If per person share investment limit and share ownership proportion as prescribed by Rastra
Bank from time to time has not been fulfilled,
g) If it is against the policy issued by Rastra Bank related to incorporation and license,
h) If any condition prescribed by the Rastra Bank is not fulfilled.

(2) If Rastra Bank refuses to register the proposed bank or financial institution in any of the
circumstances referred to in sub-section (1), it shall give a notice thereof to the applicant.
Chapter-3
Provision relating to Securities Transactions

8. Prospectus: (1) Before publicly issuing its securities, bank or financial institution shall obtain
approval in accordance with the laws in force relating to securities and have the prospectus registered
with Rastra Bank.
(2) Until the prospectus is registered pursuant to sub-section (1), the bank or financial institution,
or anybody acting on behalf of such bank or financial institution shall not publish the prospectus of
such bank or financial institution.
(3) Notwithstanding anything mentioned in sub-section (1), the Rastra Bank shall not register a
prospectus until it receives information in writing that approval has been given by the Securities
Board in relation to the registration of the prospectus.

9. Allotment of shares: (1) Every bank or financial institution shall set aside at least thirty percent of its
total issued capital for subscription by the general public.
Explanation: For the purpose of this sub-section "Public" means natural person.

(2) Shares set aside for general public as pursuant to sub-section (1) must be sold within the
prescribed time. If shares set aside for sale purpose is not sold than such shares can be sold to other
firm, company or institution.
(3) Bank or financial institution may set aside 0.5 percent of the shares beside shares set aside as
pursuant to sub-section (1).
(4) If required bank or financial institution can convert the remaining share portion to public
share without decreasing the ownership of promoter share group below fifty one percent, by fulfilling
criteria as prescribed by Rastra Bank
Explanation: For the purpose of this chapter,-
a) "Promoter Share group" means promoter share group as prescribed by the Rastra Bank.
b) "Public Share group" means share group other than promoter share group.

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 (5) Notwithstanding anything mentioned in sub-section (1), in context of bank or financial
institution and infrastructure development bank, incorporated under significant share ownership of
Nepal Government, is not necessary to have the share ownership ratio pursuant to sub-section (1).
(6) In the case of a bank or financial institution incorporated in joint venture with a foreign bank
or financial institution or with foreign financial institution or infrastructure development bank has to
sale share to public as prescribed by Rastra Bank.
(7) While inviting application from the general public for the subscription of its shares, every
bank or financial institution shall demand payment of cent percent amount of the face value of its
shares along with application.

10. Dealing in securities: (1) While issuing its securities for subscription by the general public, every
bank or financial institution do all acts such as the sale, allotment, and exchange, of such securities in
accordance with the laws in force relating to the securities.
(2) Every bank or financial institution shall file with the Rasta Bank a copy of an agreement made
by it on dealing of securities through any institution dealing in securities, within seven days after the
date of making of such agreement.
(3) Every bank or financial institution shall take prior approval of Rastra bank before issuing any
types of debenture or financial instruments.
(4) The Rastra Bank may prescribe conditions while granting approval pursuant to sub-section
(3), it is the duty of respective bank or financial institution to abide by the conditions.

11. Provisions related to selling or pledging of shares: (1) The promoter of a bank or financial
institution shall not be entitled to sell or pledge any share registered in his or her name for at least five
years from the date of commencement of financial transactions.
(2) Notwithstanding anything mentioned in sub-section (1), if there arises a special circumstance
due to the emergence of any obstruction or hindrance in the operation of a bank or financial
institution or the promoters get blacklisted for financial transactions with other bank or financial
transactions, shares can be sold or pledged between promoters after getting approval from Rastra
Bank.
Explanation: For the purpose of this section "Special Circumstance" means a situation where board
meeting could not be held for consecutively three times due to an insufficient quorum or a decision
could not be made due to dispute among promoters.
(3) If the promoter wishes to sell or pledge the shares held in his or her name after five years from
the date of commencement of financial transactions by a bank or financial institution and after
issuance of shares to public, such sold shares, after getting approval from Rastra Bank, should be
available for sell or pledge only in promoter's group.
But for promoters holding share less than two percent of paid up capital, approval from Rastra
Bank is not necessary to sell or pledge his or her share.
(4) Notwithstanding anything mentioned in sub-section (1) and sub-section (2) of section 9,
promoter's share can be converted into public share after ten years from the date of commencement of
transactions by a bank or financial institution, keeping in view the impact it makes in securities
market, banking and overall financial sector, after getting approval from Rastra Bank.

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 (5) In-case of company or corporate body holding promoter shares, prior approval of Rastra Bank
is required before making change in shareholders, selling of shares or transferring of shares of
significant shareholders of such company or corporate body.
But for company or corporate body holding share less than two percent of paid up capital of a
bank or financial institution, approval from Rastra Bank is not necessary to sell or pledge share.

12. Restriction on dealing in securities transactions: (1) No director, chief executive, auditor or
company secretary or any parson directly involved in management and accounting functions of a
bank or financial institution shall sell, purchase or pledge, gift, transfer or exchange, or cause to be
purchased, pledged, gifted, transferred or exchanged, the securities of the concerned bank or financial
institution or those of its subsidiary company under his or her own name or in the name of his or her
family or in any other person's name or in the name of any firm, company or institution controlled by
such persons or to other persons while he or she holds such office or until at least one year from the
date of his or her retirement from that office.
Provided that this subsection will not restrict the sell, purchase or transfer of share in the case of
issue of bonus share, right share, share allotted to employee or issue of new share, or implementation
of Rastra Bank direction or sell of all shares of a bank or financial institution owned by any promoter
or by a corporate body having authority to appoint promoter, or in the case of merger between bank or
financial institution as per chapter -10 or acquisition of a bank or financial institution by other bank or
financial institution, or sell or transfer of securities between directors nominated from promoters or
between promoters in order to remove the obstruction or hindrance of operation of bank or financial
institution, after approval from Rastra Bank or for improvement of problematic bank or for settlement
process.
(2) If any person does any act in contravention of sub-section (1), the concerned bank or financial
institution shall forfeit and sell such shares as prescribed by Rastra Bank.

13. Prohibition on purchase by bank or financial institution of its own shares: (1) No bank or
financial institution shall purchase its own shares or lend moneys against security of its own shares.
(2) Notwithstanding anything contained in sub-section (1), in the following circumstances, a bank
or financial institution may, with the approval of the Rastra Bank, so buy back its shares out of its free
reserves available for being distributed as dividends not exceeding the percentage prescribed by the
Rastra Bank:-
a) If the shares issued by the bank or financial institution are fully paid up,
b) If the shares issued by the bank or financial institution have already been listed in the
securities market,
c) If the buy-back of shares is authorized by the articles of association of the concerned bank or
financial institution,
d) If a special resolution has been adopted at the general meeting of the concerned bank or
financial institution authorizing the buy-back,
e) If the ratio of the debt owed by the bank or financial institution is not more than twice the
capital and general reserve fund after such buy-back of shares,
Explanation: For the purpose of this clause, "Debt" means all amounts of secured or unsecured
debts borrowed by the bank or financial institution.

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 f) If the value of shares to be bought back by a bank or financial institution is not more than
twenty percent of the total paid up capital and general reserve fund of that bank or financial
institution,
g) If the directives regarding capital fund, issued by Rastra Bank to bank or financial institution,
is followed after such buy-back of shares,
h) If the buy-back of shares is not in contravention of the directives issued from time to time by
the Rastra Bank in this respect.
3) Any bank or financial institution shall make an application, setting out the following matters,
to the Rastra Bank to obtain approval for the purpose of sub-section (2):-
a) The reason, necessity, tenure and ways for the buy-back of shares,
b) A statement of evaluation of possible impacts on the financial situation of the bank or
financial institution as a result of buy-back of shares,
c) The class, value per share and number of shares intended to be bought back,
d) The maximum or minimum amount required to buy back shares as referred to in clause (c)
and source of such amount,
e) Such other matters as specified by the Rastra Bank in respect of buy-back of shares,
f) Such other necessary matters as required to be disclosed under the laws in force.
(4) If an application is made pursuant to sub-section (3), the Rastra Bank shall, if it finds
appropriate to grant approval upon the examination of the submitted documents, grant its approval to
bank or financial institution to buy-back its own shares.
(5) On receipt of the approval pursuant to sub-section (4), the concerned bank or financial
institution may buy back its shares in any of the following manners, within six months after the date
of receipt of such approval or twelve months of the adoption of a special resolution at the general
meeting, whichever occurs later:
a) Purchase from the stock exchange,
b) Purchasing from the existing shareholders on a proportionate basis.
(6) If a bank or financial institution buys back its own shares pursuant to sub-section (5), it shall
file with the Rastra Bank a return containing the number of shares bought back, amount paid for the
same and other necessary details within thirty days of the date of such buy-back.
(7) There shall be established a separate capital redemption reserve fund, to which a sum
deducted from paid up capital equal to the nominal value of the shares bought back pursuant to sub-
section (5) shall be transferred, and the amount of such fund shall be maintained as if it were the paid-
up capital.
(8) If a bank or financial institution buys back its shares pursuant to sub-section (5), it shall
cancel the shares so bought back within one hundred and twenty days of the date of such buy-back.
(9) Other processes where a bank or financial institution can buy back its shares shall be as
prescribed by the Rastra Bank.

Chapter - 4
Provisions relating to Board of Directors and Chief Executive

14. Formation of Board of Directors: (1) Every bank or financial institution shall have a Board of
Directors consisting of not less than five and not more than seven directors.

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 (2) The director shall be appointed by general meeting of bank or financial institution, subject to
this Act and articles of association.
Provided,-
a) The directors shall be appointed by the promoters pending the holding of the first annual
general meeting of the bank or financial institution,
b) If the office of any director is vacated before holding of annual general meeting, the
board of directors shall appoint another director in that vacancy until next annual general
meeting,
c) In the case of a corporate body subscribing shares, such body may appoint a director in
proportion of the share and while appointing for the post same person shall not be
appointed twice as a director in bank or financial institution,
d) Notwithstanding anything mentioned in clause (c), this clause shall not create obstruction
for director of any bank or financial institution to be a director in infrastructure
development bank,
(3) The Board of Directors shall appoint one independent director from amongst the persons
having the experience and qualification as pursuant to section 17 and this information should be
communicated in the first general meeting to be held after such appointment.
Provided promoter, director or shareholder subscribing more than 0.1% share, of a bank or
financial institution and their family member cannot be an independent director.
(4) Notwithstanding anything mentioned in sub-section (1) or (3), there shall not be more than
one director in a bank or financial institution from a family.
(5) A person chosen by the directors from among themselves by a majority decision shall be the
chairperson of the Board of Directors.
(6) In the case of company, corporate body, foreign bank or financial institution having shares of
a bank or financial institution, may appoint a director in proportion of the shares subscribed by such
body and in addition to the director, such body shall also appoint an alternate director capable enough
to work in his or her absence.

15. Tenure of Director: (1) The tenure of office of a director shall be as provided in its articles of
association, but not exceeding four years and he or she can be re- appointed or nominated.
Provided, independent director can be appointed only for one term.
(2) Notwithstanding anything mentioned in sub-section (1), executive chairperson or managing
director appointed after commencement of this Act, shall hold the office only for two consecutive
tenure.

16. Qualification of Directors: (1) A person has to possess the following qualification in order to be
eligible for appointment as director:
a) Having gained at least five years of experience in foreign or domestic bank or financial
institution or in related corporate institution sector as a promoter or officer, or as an officer
level in Government of Nepal, or
b) Having acquired bachelor's degree and having gained at least three years of experience in
foreign or domestic bank or financial institution or related corporate institution sector as a
promoter or officer or as an officer level in Government of Nepal, or

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 c) Having acquired master's degree in related subject as prescribed.
(2) Notwithstanding anything mentioned in sub-section (1), the educational qualification and
experience of the directors of class 'D' financial institutions shall be as prescribed by the Rastra Bank
from time to time.
Provided that, the qualification of an independent director shall be as pursuant to section 17.

17. Qualification of Independent Director: The bank or financial institution shall appoint an
independent director from amongst the person having following qualification and experience:-
a) In case of class 'A' bank or class 'B' national level development bank, person having master
degree in subject as prescribed by Rastra Bank and gained experience as prescribed by Rastra
Bank,
b) In case of class 'B' other development banks besides national level development bank and
class 'C' financial institution, person having bachelor degree in subject as prescribed by
Rastra Bank and gained experience as prescribed by Rastra Bank,
c) In case of class 'D' micro-finance financial institution, person having qualification and
experience as prescribed by Rastra Bank.

18. Disqualification of directors: (1) Any of the following persons shall not be eligible to be a director
of a bank or financial institution:-
a) Who is below 25 years of age,
b) Who is unsound mind or insane,
c) Who is declared insolvent in Nepal or foreign,
d) Who has been blacklisted or is in defaulter list in connection with any transaction with bank
or financial institution in Nepal or in foreign, and a period of at least three years has not
lapsed after his or her name has been removed from such defaulter list or blacklist,
e) Who is a serving director of a bank or financial institution or any corporate institution
carrying on transactions relating to any kind of deposit collection and insurance related
business or an employee serving in such institution,
f) Who is a borrower or serving auditor or advisor of concerned bank or financial institution or
a partner in any kind of contract agreement with the bank or financial institution or person,
firm and company having self-interest,
g) Who has acquired the membership of the Stock Exchange to act as a securities dealer or
merchant banker,
h) Who is serving as a director in licensed institution,
i) Who has not subscribed the minimum number of shares required to be subscribed to be
eligible for appointment as a director by virtue of ownership of share pursuant to the articles
of association of the concerned bank or financial institution,
j) Who is a serving employee of the Government of Nepal or corporate body owned by
Government of Nepal or Rastra Bank or bank or financial institution,
Provided that, this provision shall not be applicable to the nomination made by the
Government of Nepal or institution owned by Government of Nepal or Rastra Bank or Bank
or Financial Institution as a director of micro-finance or infrastructure development bank of
which shares have been purchased by it.

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 k) Who has failed to pay the tax pursuant to the laws in force,
l) Who is convicted by Nepalese court or foreign court for, theft, cheating, fraud,]{ forgery,
corruption, criminal offense involving moral turpitude or banking offense and sentenced in
thereof, and a period of ten years has not elapsed from the expiry of the sentence,
m) Who is punished by regulatory body for activities against law pursuant to the laws in force or
a period of five years has not elapsed from the expiry of such punishment,
n) In case of independent director, if he or she is a promoter or owns more than 0.1% of shares
of a bank or financial institution,
o) Whose imprisonment sentence is not completed, fine is unpaid as per the decision of court,
government due is not paid
(2) Notwithstanding anything mentioned in the clause (e) of sub-section (1), officer or
employee of a bank or financial institution can work as a director in subsidiary company of same
bank or financial institution.

19. Circumstances resulting in discontinuance of office of a director: (1) No person shall continue to
hold the office of a director in a bank or financial institution, in any of the following circumstances:-
a) Not having qualification pursuant to section 16 or 17 or not being qualified under section 18,
b) If shareholders holding at least fifty one percent share of a group, passes a resolution in the
general meeting to remove the director who was nominated as a director from the same
group,
Explanation: For the purpose of this section "Group" means group of promoter and public
shareholders.
c) If the resignation tendered by the director is accepted,
d) If he or she does any act prohibited by this Act or prescribed by Rastra Bank from being done
by a director,
e) If the Rastra Bank directs to remove the director for being disqualified to remain in the post
of director because of his activity against the interest of depositor or bank or financial
institution.
2) If bank or financial institution believes that any of its directors is disqualified to be in position
of director in line with this Act or Rastra Bank Act or if the director is not serving in the position,
than a fifteen days' notice must be given to Rastra Bank.
3) Rastra Bank can give instruction to conduct necessary investigation against director in relation
being disqualified to be in the position pursuant to sub-section (2).

20. Related to person holding constitutional position: Person holding constitutional position cannot sit
in the position of a director or executive chief, during his/her serving period in such position.

21. Meetings of Board: (1) Meetings of the Board shall be held at least 12 times in a year.
Provided that the interval between any two meetings shall not exceed sixty days.
(2) The chairperson shall call a meeting at any time when at least one-third of the directors
request for the same in writing stating the topic of discussion as well.

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 (3) Meetings of the Board shall be presided over by the chairperson. In the absence of the
chairperson, the meeting shall be presided over by a director selected by a majority of the director's
form amongst themselves.
(4) No meeting of the Board shall be held unless it is attended by at least fifty one percent of the
total number of directors.
(5) The decision of a majority in the meeting of the Board shall be binding, and, only in the event
of tie, the person in chair may exercise the casting vote.
(6) Minutes regarding the names of directors present in the meeting of board of directors, the
subjects discussed and the decisions taken thereon shall be recorded in separate book, and such
minute shall be signed by all directors present in the meeting.
Provided that, if any directors want to put forward any differing opinion than he or she may
mention the differing opinion in the minute book and sign it.

22. Functions, duties and power of Board of Directors: (1) All the functions and duties to be
performed and all powers to be exercised by the bank or financial institution, other than those to be
performed by the general meeting of bank or financial institution, shall be performed and exercised
by the Board of Directors, subject to this Act, laws in force and memorandum of association and
articles of association.
(2) The board of directors need to provide commitment in regard to no intervention in daily work
and transactions of bank or financial institution like operate bank or financial institution in the interest
of depositors, customers and public shareholders through overall risk management, to collect deposit,
provide loan, make investment, employee management and make budget expenditure by ensuring
appropriate corporate governance in bank or financial institution.
(3) The other functions, duties and power of the board of directors shall be as follows:-
a) To formulate and implement necessary bye-laws, directives and procedures, in line with
this Act, laws in force and directives of Rastra Bank, to perform the daily work of bank
or financial institution properly,
b) To formulate and implement internal control system and risk management standards in
order to operate banking and financial transactions carefully as per policy and strategy
and not to let arise risk or risky circumstances in banking or financial institution
transactions,
c) To make necessary policy level provisions for every actions and functions to be
performed by bank or financial institution, regularly supervise the actions and functions
performed and operate the bank or financial institution in well managed and prudently,
d) To prepare clear organization hierarchy of bank or financial institution and to formulate
policy and implement it,
e) To present annual report along with auditor report in annual general meeting of bank or
financial institution,
f) To perform other functions as prescribed by the Rastra Bank from time to time.

23. Responsibilities and duties of directors: (1) No director shall do anything to derive personal benefit
through the bank or financial institution or in the or in the course of performing the functions of the
bank or financial institution.

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 (2) The director himself or herself shall be responsible for any action taken or function performed
by any director working as director of bank or financial institution by acting beyond his or her
jurisdiction.
(3) The directors of bank or financial institution by adopting institution's efficient business
strategy shall take responsible in relation to risk management and internal control.
(4) No director shall interfere with the routine business relating to the management of the bank or
financial institution.
(5) Directors shall fully comply with directives issued by the Rastra Bank from time to time.

24. Details to be obtained from directors: Bank or financial institutions shall take following details of
directors:-
a) Name, caste, address, education qualification, occupation and experience of directors,
b) If he or she has worked as a director, officer or employee of any other entity, than detail
mentioning his or her position and responsibilities,
c) Name, caste and related person details of director's family, financial interest of his or her or
of his or her family in bank or financial institution and other entity and share ownership of his
or her or of his or her family in such institutions,
d) Particulars of shares or debentures in the bank or financial institution or in its holding or
subsidiary company as subscribed by director or by his or her family,
e) If any member of his or her family is working as an officer or employee of the bank or
financial institution, details thereof,
f) If he or she or any of his or her family members has entered into or going to entered into any
kind of contract with the bank or financial institution, details thereof,
g) If he or she has any kind of interest in the appointment of the chief executive, company
secretary and auditor, details thereof,
h) Written authority given to the Rastra Bank from director in regards of making investigation
or cause to make investigation about his or her financial and business background or
exchange such notice and information or cause to exchange such notice and information,
i) Self-disclosure of being qualified to be a director pursuant to this Act,
j) Such other details prescribed by the Rastra Bank as required to be informed to the Rastra
Bank and the Board of Directors, from time to time.

25. Director's information and record: (1) The director shall submit the particulars pursuant to section
24 to bank or financial institution, within seven days from the date of his or her appointment.
(2) Bank or financial institution shall separately record the particulars submitted pursuant to sub-
section (1).
(3) If the director or any member of his or her family has significant ownership, directly or
indirectly, or any other kind of interest than such director shall provide full detail about such
information in the first meeting of Board of Directors.
(4) A director who has any kind of interest in topic discussed at a board meeting or at any other
sub-committee than he or she shall inform about his or her interest at the beginning of such meeting
and shall not take part in the discussion or in voting related to such topic.

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 (5) If there is change in details submitted pursuant to sub-section (1) or change in director than,
notice should be sent to the Rastra Bank within fifteen days from the date of such changes.
(6) Rastra Bank has authority to make or cause to make examination in relation to information
pursuant to sub-section (5), if it finds such examination is necessary.

26. Sub-committee can be formed: (1) The Board of Directors can form one or more than one sub-
committee for any specific purpose, other than those to be done by any entity or officer as per this
Act, in line with directives from Rastra Bank.
Provided that, the chairman of board of director shall not represent in sub-committee.
(2) The functions, duties, powers, procedures of sub-committee formed pursuant to sub-section
(1) and remuneration or allowance to be provided to member attending the meeting shall be as
prescribed by the board of directors and the activities performed and expense incurred by such sub-
committee should be disclosed clearly in annual report.

27. Delegation of Authority: The Board of directors may delegate some of its authority, specifying its
perpetuity and reason, to director, sub-committee formed pursuant to section 26, chief executive or
any person acting as chief executive of bank or financial institution, under its supervision and
direction.

28. Allowance and facilities of directors: The meeting allowance and other facilities receivable by
directors for attending a board meeting shall be as prescribed by articles of association.

29. Appointment and conditions of services of chief executive: (1) The board of directors shall appoint
the chief executive for management of bank or financial institution, subject to this Act, memorandum
of association and articles of association.
(2) The tenure of office of the chief executive shall be a maximum of four years and he or she
may be re-appointed for another one term.
(3) The provision mentioned in sub-section (2) shall come into force after commencement of this
Act.
(4) Notwithstanding anything mentioned in sub-section (2), the board of director can remove the
chief executive from his or her post if his or her work performance is not satisfactory.
Provided that he or she shall be granted a reasonable opportunity to defend himself or herself
prior to remove him or her from his or her office.
(5) While making appointment of the chief executive, person having following qualification and
experience shall be appointed and notice of such appointment must be given to the Rastra Bank
within seven days from the date of such appointment:-
a) Having obtained master degree in management, banking, finance, monetary, economics,
commerce, account, mathematics, business administration or law subjects,
b) Having obtained Chartered Accountancy degree or bachelor's degree in management,
banking finance, monetary, economics, commerce, statistics, account, mathematics,
business administration or law subjects and have gained at least ten years of work
experience of the office of banking and financial sector, government entity, corporate

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 body, university or international association or institution performing such work in the
position of officer level or above,
Provided that qualification and work experience for chief executive of class "D" financial
institution, shall be as prescribed by the Rastra Bank.
c) Having fulfilled the requirement as prescribed by Rastra Bank, related to the appointment
of chief executive.
d) Not being disqualified pursuant to sub-section (1) of section 18.
Provided that, in case of chief executive, the disqualification provision mentioned in
clause (i) and (n) of sub-section (1) of section 18 shall not be applicable.
(6) The Rastra Bank can remove the chief executive appointed pursuant to sub-section (1) and
give direction to concerned bank or financial institution for appointment of another person, who is
qualified for appointment as chief executive as pursuant to this Act, in the position of chief executive,
if he or she does not seem to be qualified as pursuant to this Act.
(7) The remuneration, other condition of service and facilities of chief executive shall be as
prescribed by the Board of Directors and the conditions of his or her service and facilities shall be
determined at the time of appointing him or her.
(8) The chief executive of any bank or financial institution cannot serve in the position of chief
executive, officer, employee, or other position of any other business institution.
Provided that, in case of bank or financial institution that has done investment in infrastructure
development bank than in this situation this sub-section won't restrict him or her to become the
director of such development bank.
30. Functions, duties and powers of chief executive: (1) The functions, duties and powers of the chief
executive shall be as follows:-
a) To exercise the power delegated ] by the Board of Directors, implement the decisions of the
board of directors and supervise and control the activities and transactions of the bank or
financial institution, subject to the memorandum of association and articles of association,
b) To prepare annual budgets and action plans of the bank or financial institution and present
them before the Board for approval,
c) To manage necessary human resources, subject to the personnel bye-laws of the bank or
financial institution,
d) To implement, or cause to be implemented, the decisions of the general meeting,
e) To operate the institution according to this Act and Rastra Bank's directives and ensure
effective internal control and proper risk management of bank or financial institution,
f) To present on time all such particulars, documents, decisions, etc. as are required to be
submitted by the bank or financial institution to the Rastra Bank or any other body, subject to
this Act, Rastra Bank's directives, memorandum of association and articles of association,
g) To operate the institution ensuring maximum benefit of depositors, shareholders and bank or
financial institution,
h) To implement appropriate standards for top level management, in line with the policies
determined by the board of directors,
(2) The Executive Chief shall be accountable to the Board for all of his or her functions.

Chapter -5

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 Provisions relating to License

31. Prohibition on carrying on banking and financial transactions by anyone other than bank or
financial institution: (1) No one other than a bank or financial institution, having license to carry on
banking and financial transactions pursuant to section 34, shall carry on banking and financial
transactions referred to in this Act.
(2) For the purpose of providing the license to bank or financial institution, the Rastra Bank shall
frame and implement the license policy related to bank or financial institution,

32. Use of name of a bank or financial institution: (1) No one can use the name of a bank or financial
institution for the purpose of carrying on banking and financial transactions without getting approval
from the Rastra Bank.
(2) No any person, company or institution can use the word 'bank', 'banking', 'finance', financial'
or other symbols, adjective giving similar meaning or words giving similar types of meaning, without
getting prior approval from the Rastra Bank, other than bank or financial institutions or foreign bank
or financial institution opening branches in Nepal who have obtained license to carry on banking and
financial transactions subject to section 49 of this Act.
(3) Notwithstanding anything written in sub-section (2), provision mentioned in sub-section (2)
shall not be applicable in relation to following institutions:-
a) Any institution established or having obtained recognition as per prevailing practice or
international agreement or prevailing laws,
b) Application submitted, to obtained license to carry on banking and financial transaction,
by a company incorporated within six months pursuant to prevailing laws,
(4) Notwithstanding anything contained in sub-section (2), any bank or financial institution which
has obtained approval to carry on the financial transactions pursuant to the laws in force at the
commencement of this Act may carry on the financial transactions using the name existing at the time
of obtaining the approval to carry on such transactions.
(5) Class "B", class "C" and class "D" financial institution shall be entitled to use the names
development bank, finance company and micro-finance financial institution, respectively.
(6) The licensed institution using the name micro-finance development bank before
commencement of this Act, shall use the name as prescribed by sub-section (5) after commencement
of this Act.

33. Application to be made for license to carry on banking and financial transactions: (1) A bank or
financial institution desirous of carrying on banking or financial transactions pursuant to this Act shall
make an application along with prescribed fee to the Rastra Bank for a license.
(2) The bank or financial institution shall also attach the following particulars and documents
with application to be made pursuant to sub-section (1):-
a) A copy of the memorandum of association, articles of association of the bank or financial
institution and the certificate of incorporation as per prevailing laws,
b) Particulars of an office building equipped with all infrastructures required to carry on
transactions, or, if such building is to be rented, a copy of lease agreement, and the

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 particulars of the building rented along with particulars mentioning existence of adequate
grounds for providing banking and financial services and facilities,
c) Documents proving that the amount of shares which the promoter of the bank or financial
institution has undertaken to subscribe has been paid and deposited with the Rastra Bank,
d) Bye-laws relating to service, conditions and facilities, financial administration bye-laws
and bye-laws relating to write-off of loans of the bank or financial institution,
e) Address of main location or branch location for carrying on transactions, if had been
confirmed,
f) Consent given to comply with the conditions prescribed by the Rastra Bank for carrying
on the banking and financial transactions,
g) Business strategies and nature of transaction to be operated and a business plan prepared
covering internal control and risk management process along with organizational
structure of bank or financial institution,
h) Name list of directors and officers and particulars mentioning that he or she is eligible to
be a director or officer as pursuant to this Act,
i) Commitment that the minimum capital as prescribed by the Rastra Bank from time to
time shall be maintained until the banking or financial transaction is carried on,
j) Commitment that the bank or financial institution can maintain the internal control
process to manage all the possible risks in an appropriate way,
k) Such other particulars and documents as may be prescribed by the Rastra Bank from time
to time.
(3) In case of a bank or financial institution to be incorporated in Nepal under the joint investment
of any foreign bank or financial institution, than following documents or particulars should be
submitted to the Rastra Bank in addition to the subjects mentioned in sub-section (2):-
a) In case of 'A', 'B', 'C' and 'D' class of bank or financial institution, approval or consent
letter obtained, as per laws of respective nation, by the foreign bank or financial
institution from government of such nation or central bank or regulatory entity that
authorizes to carry on banking and financial transaction to such foreign bank or financial
institution in Nepal,
b) In case any difference has aroused during fulfillment of any matters as per this Act, after
submitting application to the Rastra Bank for incorporation of foreign bank or financial
institution or after obtaining license from the Rastra Bank, than such foreign bank or
financial institution shall provide details thereof,
c) Such other particulars and information as demanded by the Rastra Bank.
(4) If any documents or particulars received pursuant to sub-section (2) or (3) is found to be
insufficient or inadequate during examination, than the Rastra Bank can demand additional
documents or particulars from such bank or financial institutions.

34. License can be issued to carry on banking and financial transactions: (1) If an application and
documents or particulars attached with it is received pursuant to section 33, the Rastra Bank may, if it
finds all the requirement for carrying on banking or financial transaction is fulfilled upon
examination, than the Rastra Bank can issue a license of any one of the classes to carry on banking or

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 financial transactions, on the basis of the classification of banks or financial institutions as referred to
in section 37, within one hundred and twenty days after making of the application.
(2) The Rastra Bank shall confirm the following matters before issuing license pursuant to sub-
section (1):-
a) If the issuance of the license to carry on banking or financial transactions shall ensure a
healthy competition and make effective the transactions relating to financial
intermediation and thus serve the interests of depositors,
b) If the bank or financial institution is competent to carry on financial transactions, subject
to this Act or the rules or bye-laws framed under this act or the given orders or directives
and the memorandum of association and articles of association,
c) If, based on the application and the attached particulars and documents attached with the
application made for the license pursuant to section 33 are complete and has adequate
physical infrastructure,
d) If any of the officer appointed or involved or to be appointed or to be involved in bank or
financial institution is capable to operate banking and financial transactions.
(3) While issuance of license to carry on banking and financial transactions by the Rastra Bank,
the commencement date of such license shall be assumed to be from the same date, if the
implementation date is specified and if such date is not specified than it shall be from the date on
which license was issued.

35. Power to refuse to issue license: (1) Notwithstanding anything contained in section 30, the Rastra
Bank may, in any of the following circumstances, refuse to issue a license to any bank or financial
institution to carry on the banking and financial transactions:-
a) If, in view it has adverse effects on the stability, fair competition and trustworthiness of
financial system of Nepal,
b) If, for the protection of the interests of depositors, it does not seem just and appropriate to
issue a license to carry on the financial transactions,
c) If, the infrastructure is not completed for carrying on banking and financial transactions,
d) If it does not appear that other details or conditions as prescribed by this Act, is not
fulfilled.
(2) If there exists a situation where the license to carry on the banking and financial transactions
cannot be issued to any bank or financial institution pursuant to this section, the Rastra Bank shall
give a notice thereof, accompanied by the reason for the same, to the concerned bank or financial
institution within ninety days from the date of application.

36. Power of the Rastra Bank to prescribe conditions: (1) While issuing a license to carry on the
financial transactions pursuant to section 34, the Rastra Bank may prescribe necessary conditions, in
view of the existing condition of bank or financial institution, healthy operation of the financial
transactions and the interest of depositors. It shall be the duty of the concerned bank or financial
institution to comply with such conditions.
(2) The Rastra Bank may make necessary changes and alterations in the conditions prescribed
pursuant to sub-section (1), from time to time.

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37. Classification of bank or financial institutions: The Rastra Bank shall classify the bank or
financial institutions into "A", "B", "C" and "D" classes on the basis of minimum paid-up capital, and
transaction to be carried on and working area of such bank or financial institution to the bank or
financial institution making application pursuant to section 33 to carry on banking and financial
transaction and issue the license to concerned bank or financial institution accordingly.
Provided that, the infrastructure development bank shall not be classified in any categories.

38. Conversion into bank or financial institution of higher class: (1) If, any licensed institution of a
lower class wants to convert itself into bank or financial institution of one level higher class than,
shall make an application to the Rastra Bank along with particulars prescribed by the Rastra bank.
Provided that, class "D" institution shall not be converted into higher class.
(2) While making an examination of the application and particulars attached therewith, the Rastra
bank if finds appropriate to convert into bank or financial institution of one level higher class, can
give prior approval to such bank or financial institutions based on the periphery of following matters:-
a) If it has fully paid up capital prescribed by the Rastra Bank for a bank or financial
institution of such higher class,
b) If it has maintained the capital adequacy fund as directed by the Rastra bank since last
five years, has earned profits since last five consecutive years and has its average non-
performing loan of last five years within the limit prescribed by the Rastra Bank,
c) If it has written off the preliminary expenses,
d) If the share required to be issued publicly are issued and allotted.
e) If the general meeting has passed the special resolution of conversion into bank or
financial institution of higher class,
f) If it has met all the conditions as prescribed by the Rastra Bank.
(3) The Rastra Bank shall make the bank or financial institution, who have received the prior
approval as referred to in sub-section (2), to amend the memorandum of association and articles of
association and then issue the license of bank or financial institution of higher class.

39. List to be published: (1) The Rastra Bank shall publish a list of bank or financial institutions
carrying on the banking or financial transactions in national level daily newspaper or through any
other means of publication, every month.
(2) The list referred to in sub-section (1) can also include the date of commencement of
transactions of bank or financial institution, paid-up capital, condition of capital fund, total loan,
condition of non-performing loan and other particulars as seemed necessary to the Rastra Bank.

40. Special provision related to the branch of a foreign bank: (1) If, the Rastra Bank gives approval
to any internationally rated foreign bank to carry on banking and financial transaction in Nepal
through branch and the branch is incorporated as per prevailing company law of Nepal, thereof, than
it shall be assumed to be like a bank or financial institution incorporated as per this Act and in case of
such branch, unless mentioned otherwise, all other provision of this Act or of the rules, bye-laws,
orders or directives issued as per this Act shall be equally applicable.
(2) The Rastra Bank can give necessary direction in relation to responsibility of those officer and
employee who have taken responsibility of the functions, duties, rights, responsibility, liability,

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 belongings, accounting, etc. and have performed such activities and actions of a branch of foreign
bank.
(3) The Nepal located branch of foreign bank shall give first priority to settle the liability of
Nepal while using its property to fulfill its liability, without having any adverse effect on provisions
of any other laws.
(4) Notwithstanding anything mentioned in this Act, the branch of foreign bank can carry on
wholesale banking transactions.
(5) The actions and activities of branch office of a foreign bank shall be as prescribed by the
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 the bank or financial institution shall
be as prescribed by the Rastra Bank from time to time.
(2) The minimum paid up capital pursuant to sub-section (1), shall be maintained by the bank or
financial institution within the time frame determined by the Rastra Bank.
(3) The Rastra Bank can make provision to let any person, firm, company or institution to invest
only up-to fifteen percent of paid-up capital of any one of the bank or financial institution.
(4) A person, firm, company or institution making an investment in any one of the bank or
financial institution as pursuant to sub-section (3), shall make an investment of less than one percent
in paid-up capital of other bank or financial institutions.
(5) The provision related to extent of investment, any person, firm, company or institution can
make, in paid-up capital of a bank or financial institution to be opened in foreign joint investment,
class "D" financial institution and infrastructure development bank, shall be as prescribed by the
Rastra Bank.
(6) The percent of share capital which can be invested by any person or institution in the bank or
financial institution or for incorporation of such bank or financial institution shall be as determined
by the Rastra Bank from time to time.

42. Capital fund: (1) Every bank or financial institution shall maintain a capital fund in the ratio
prescribed by the Rastra Bank on the basis of its total assets or total risk-weighted assets. While
prescribing such ratio, the Rastra Bank can also prescribe additional capital fund ratio.
(2) If any bank or financial institutions fails to maintain the capital fund as referred to in sub-
section (1), the Board of Directors of such bank or financial institution shall give information thereof
to the Rastra Bank within a month.
(3) In addition to the other matters, the information given pursuant to sub-section (2) shall also be
accompanied by the reasons for failure to maintain the capital fund and the plan or program prepared
by the Board of Director to increase the capital fund and restore it to the conditions as per the
directives issued by the Rastra Bank.
(4) If the information and plans or program submitted by the Board of Directors pursuant to sub-
section (2) or (3), seems to be reasonable than the Rastra Bank may give necessary directives to the
concerned bank or financial institution to implement such plan or program, and if any amendment or

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 alteration is to be made in the proposed plan or program, it may give directive, accompanied by the
reason for such amendment or alteration, to the concerned bank or financial institution to amend or
alter such plan or program and implement the same.

43. Provision related to possible losses: The bank or financial institution shall maintain the provision for
possible losses to cover its loan including assets and liability related to off balance sheet transactions,
as prescribed by the Rastra Bank.

44. General Reserve Fund: (1) A bank or financial institution must maintain a general reserve fund. At
least twenty percent of the net profits of each fiscal year shall be kept on being credited to such fund
until the amount of such fund doubles the paid-up capital and after such fund doubles the paid-up
capital than in later fiscal years, at least ten percent of the net profits shall be credited to such fund.
(2) The amount credited to the reserve fund of a bank or financial institution under sub-section (1)
may not be invested or transferred to any other head without the prior approval of the Rastra Bank.

45. Exchange Equalization Fund: (1) A bank or financial institution which has obtained the license to
carry on foreign exchange transactions shall make necessary accounts adjustments in the profit and
loss account of the revaluation profits earned as a result of fluctuations in the exchange rates of
foreign currencies, other than the Indian currency, every year at the end of the same fiscal year. While
making such accounts adjustment in the profit and loss account, if revaluation earning has been made
in any fiscal year, at least twenty five percent of such profits shall be credited to the exchange
equalization fund.
Provided that, in the case of revaluation profit-loss resulting from fluctuation in the exchange rate of
the Indian currency, it shall be as prescribed by the Rastra Bank.
(2) No amount credited to the exchange equalization fund pursuant to sub-section (1) shall,
without approval of the Rastra Bank, be spent or transferred for any purpose other than the adjustment
of loss resulting from the fluctuation of foreign currencies.

46. Liquid Assets to be maintained: A bank or financial institution shall maintain the liquid assets as
prescribed by the Rastra Bank from time to time.

47. Declaration and distribution of dividend: (1) A bank or financial institution shall obtain the
approval of the Rastra Bank prior to declaring and distributing dividends.
(2) No bank or financial institution shall declare or distribute dividends to its shareholders until it
has recovered all of its preliminary expenses, losses sustained by it until previous year, capital as
prescribed by the Rastra Bank, it sets aside such amount as required to be set aside for capital fund,
provision for possible losses and general reserve fund pursuant to section 44 and the shares set aside
for subscription by the general public are fully sold and distributed.

48. Power to give order to reduce capital: Notwithstanding anything mentioned in prevailing laws, the
Rastra Bank can issue order to bank or financial institutions to reduce their issued and paid-up capital.

Chapter-7

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 Provision relating to Operation of Banking and Financial Transactions

49. Bank or financial institutions may carry banking or financial transactions: (1) Subject to this
Act, memorandum of association and articles of association and limit, conditions or directions
prescribed by the Rastra Bank, a Class "A" banks may carry on following banking and financial
transactions:-
a) Accepting deposits with or without interest or mobilizes the deposits through various
means of financial instruments and refund of such deposits,
b) Accepting deposits, making payments, dealing, {], acting as mediator and transfer funds
through electronics instruments or means,
c) Supplying credits including hire-purchase, leasing, housing and overdraft,
d) Supplying credits by mortgaging projects and taking hypothecation and make
arrangements for jointly supplying credits on the basis of co-financing in accordance
with the mutual agreement entered into for the division of the collateral pari passu,
e) Supplying credit against the guarantee provided by any foreign bank or financial
institution,
f) Supplying a fresh credit against the security of the same movable or immovable assets
which have been furnished with it or with any other bank or financial institution as
security, to the extent covered by the total value of such security,
g) Issuing guarantees on behalf of its customers, having such customers execute necessary
bonds in consideration thereof, and acquire their movable or immovable assets as
collateral or on mortgage, or the assets of third persons as collateral and to acquire the
obtained security and mortgaged property, use it and do other transactions related with
it,
h) Obtaining refinance credit from the Rastra Bank as per necessity, or obtaining or
supplying credits to or from other bank or financial institutions,
i) Supplying funds received from the Government of Nepal or other native or foreign
agencies as credits for the promotion of projects, or managing such credits,
j) Writing off credits, subject to the prevailing credit write-off bye-laws,
k) Issuance of share, debenture, bonds, etc. for the purpose of meeting capital fund.
l) Issuing, accepting, paying, discounting or purchasing and selling letters of credit, bills of
exchange, promissory notes, cheques, travelers cheques, drafts or other financial
instruments,
m) Issuing, accepting and managing digital or cards and other financial instruments, as well,
for carrying on electronic transactions and appointing agents to discharge functions
related thereto,
n) Carrying on foreign exchange transactions, subject to prevailing laws,
o) Carrying on governmental transactions, subject to limit, conditions or directives
prescribed by the Rastra Bank,
p) Purchasing, selling or accepting bonds issued by the Government of Nepal or Rastra
Bank,

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 q) Remitting or transmitting funds to different places within or outside Nepal through
cheques or other financial instruments, receiving remittance from foreign countries and
making payment of such remittance,
r) Acting as a commission agent of its customers, taking custody of and arranging 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, making arrangements of safe deposit vaults
for customers,
s) Carrying on off-balance sheet transactions,
t) Supplying credits not exceeding the amount prescribed by the Rastra Bank, against
individual or collective guarantee, for the economic up-liftment of the destitute class,
low-income families, victims of natural calamities and inhabitants in any area of the
country,
u) Exchanging with the Rastra Bank, concerned entity or any other bank or financial
institutions particulars of, information or notices on debtors or customers who have
obtained credits or any types of facilities from it or other bank or financial institutions,
v) Purchase-sale of gold, silver,
w) Doing, or causing to be done, study, research and survey work relating to the
establishment, operation and evaluation of projects, and providing training, consultancy
and other information,
x) Properly managing or selling all types of assets coming under its ownership, pursuant to
this Act and prevailing laws,
y) Providing guarantee, on consent of two parties, for receiving or making payments
arrangements between two or more than two parties for the work that has been done and
amount has to be paid, payable or receivable after completion of such work, pursuant to
prevailing laws,
z) Performing such other functions as may be prescribed by the Rastra Bank.
(2) Subject to this Act, the memorandum of association and articles of association and limit,
conditions or directives prescribed by the Rastra Bank, a class "B" financial institution may carry on
the following other banking and financial transactions in addition to the banking and financial
transactions mentioned in clause (a), (b), (c), (f), (h), (i), (j), (k), (n), (p), (r), (s), (t), (u) and (x) of
sub-section (1):-
a) Supplying credits by mortgaging projects, making arrangements for jointly supplying
credits on the basis of co-financing in accordance with the mutual agreement entered
into for the division of the collateral pari passu,
b) Issuing guarantees on behalf of its customers, having such customers execute necessary
bonds in consideration thereof, and acquire their movable or immovable assets as
collateral or on mortgage, or the assets of third persons as collateral,
c) Issuing, accepting, paying, discounting or purchasing and selling bills of exchange,
promissory notes, cheques, travelers cheques, drafts,
d) Obtaining credit against the security of its movable and immovable property,
e) Dealing in Letter of Credit and remittance transactions, by taking prior approval from the
Rastra Bank,

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 f) Acting as a commission agent of its customers, taking custody of and arranging for the
sale or purchase of shares, debentures or securities, collecting interest, dividends, etc.
accruing from shares, debentures or securities, collecting such interests, profits,
dividends, making arrangements of safe deposit vaults for customers,
g) Activities relating to transmitting funds within Nepal,
h) Doing, or causing to be done, study, research and survey work relating to the
establishment, operation and banking, accounting, assets, loan evaluation of projects,
and providing training, consultancy, and other services and information,
i) Performing such other functions as may be prescribed by the Rastra Bank.
(3) Subject to this Act, the memorandum of association and articles of association and limit,
conditions or directives prescribed by the Rastra Bank, a class "C" financial institution may carry on
the following other banking and financial transactions in addition to the banking and financial
transactions mentioned in clause (a), (b), (f), (h), (j), (k), (p), (r), (t), (u) and (x) of sub-section (1):-
a) Supplying credits including hire-purchase, leasing, housing
b) Supplying credits jointly, on the basis of co-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,
c) Obtaining credit against the security of its movable and immovable property,
d) Making proper arrangements of its assets, sell or rent the same,
e) Issuing, accepting, paying, discounting or purchasing and selling bills of exchange,
promissory notes, cheques, travelers cheques, drafts or other financial instruments,
f) Dealing in foreign currencies transactions by getting approval from the Rastra Bank,
g) Supplying credit to any person, firm, company or institution for hiring a motor vehicle,
machine, tools, equipment, durable household goods or similar movable property, or
renting such movable property,
h) Issuing guarantees on behalf of its customers, having such customers execute necessary
bonds in consideration thereof, take securities, acquire their movable or immovable assets
on mortgage, or take the assets of third persons as collateral,
i) Leasing or selling any part of its assets, or as a whole,
j) Determining the value of goods on consent of seller and financial institution, if any
purchased goods need to be sold to another buyer on immediate or on deferred payment
terms,
k) Performing such other functions as may be prescribed by the Rastra Bank.
(4) Subject to this Act, the memorandum of association and articles of association and limit,
conditions or directives prescribed by the Rastra Bank, a class "D" financial institution may carry on
the following banking and financial transactions:-
a) Supplying micro-credit, with or without any movable or immovable property as the
collateral or security, for operating micro-enterprises to members of a group, group who
have saved or projects prescribed by the Rastra Bank,
b) Obtaining credit or grants from bank or financial institution or native or foreign
organization, and use such credits or grants for the supply of micro-credit or for making
the same effective,

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 Provided that approval of the Rastra Bank shall be obtained prior to obtaining credits or
grants from any foreign organization.
c) Prior to supplying micro-credits, evaluating the schemes for which micro-credits have
been requested and determining whether they are feasible,
d) Providing necessary services and consultancy to a group in respects of mobilization of
micro-credit,
e) Taking necessary action towards the timely realization of micro-credits,
f) Subject to conditions and limitations prescribed by the Rastra Bank, accepting deposits
and refund such deposits, after obtaining approval from the Rastra Bank,
g) Issuing share, debenture, bonds, etc. for the purpose of meeting the capital fund
requirement,
h) Exchanging with the Rastra Bank, concerned entity or any other bank or financial
institutions particulars of, information or notices on debtors or customers who have
obtained credits or any types of facilities from it or any other bank or financial
institutions,
i) Performing such other functions as may be prescribed by the Rastra Bank.
(5) Subject to this Act, the memorandum of association and articles of association and limit,
conditions or directives prescribed by the Rastra Bank, an infrastructure development bank may carry
on the following financial transactions:-
a) Supplying credit in projects related to infrastructure development and investing in shares
thereof,
b) Investing in securities of company operating projects related to infrastructure
development,
c) Issuance of bonds and opening letter of credit for transactions related to purchase, sales
or import or installation of necessary machinery equipment and their parts, for operation
and development of projects related to infrastructure development,
d) Acceptance of credit and issuance of various kinds of financial instruments, in native or
foreign currencies for arranging necessary funds for investment in projects related to
infrastructure development, on approval from the Rastra Bank,
e) Acceptance of deposits of long term nature or issuance of debentures, and mobilization of
source thereof,
f) Dealing in leasing transaction by getting approval from the Rastra Bank,
g) Acceptance of guarantee of foreign bank or financial institutions and providing of credit
and facilities in projects,
h) Performing such other functions as may be prescribed by the Rastra Bank.

50. Activities prohibited for being carried out by bank or financial institutions: (1) No bank or
financial institution shall carry out, or cause to be carried out, the following activities:-
a) Purchasing or selling goods for commercial purpose, constructing building or purchasing
any immovable property except when it is required for its own use,
b) Advancing credit against the security of its own shares,
c) Supplying any kinds of credit or facilities to any directors, persons who have subscribed
one percent or more of its shares, chief executive or any family member of such persons

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 or managing agent or person, firm, company having authority to appoint director, or
institutions having significant ownership or any firm, company or institution having
financial interest,
d) Supplying credit or facility in an amount exceeding per customer limit of its capital fund
as prescribed by the Rastra Bank to a single customer, company and companies or
partnership firm of a single group, associate person,
e) Supplying any type of credit to any person, firm, company or institution against the
guarantee given by the promoters, directors or chief executive,
f) Making investment in securities of a bank or financial institutions which is classified as
class "A", "B" and "C" by the Rastra Bank,
g) Making investment of an amount not exceeding the limit prescribed by the Rastra Bank
in the share capital of any other institution,
h) Indulging with other bank or financial institutions to mutually create any type of
monopoly or any other type of controlled practice in the financial transactions,
i) Doing any kind of act which is capable of creating an artificial obstruction in the
competitive environment of the financial sector, with the intention of deriving undue
advantage,
j) Doing such other acts prohibited from being done by a bank or financial institution as
may be prescribed by the Rastra Bank.
(2) Notwithstanding anything mentioned in this Act, nothing shall deemed to bar a bank or
financial institution for carrying on its banking and financial transactions or providing
accommodation or other facilities to its employees as pursuant to prevailing employee bye-laws of
bank and financial institution, supplying credit on bonds issued by the Government of Nepal or the
Rastra Bank, providing credit against collateral of fixed deposit receipt or against amount available in
any kind of saving account and providing of credit to promoter, director, chief executive or
shareholders subscribing more than one percent of share against collateral of their own fixed deposit,
against bonds issued by the government of Nepal or the Rastra Bank, or providing credit card facility
within the prescribed limit.

51. Provisions relating to subsidiary company: (1) A bank or financial institution shall take approval
from the Rastra Bank to open a subsidiary company.
(2) The Rastra Bank may prescribe necessary conditions while providing approval for opening
subsidiary company pursuant to sub-section (1).

52. Prohibition to conduct transactions with associate person: No any bank or financial institution
shall provide any kind of credit or facilities to associate person.

53. Information to be provided about suspicious transactions: Bank or financial institution shall
follow provisions of prevailing laws related to money laundering and financial investment in
terrorism activities while providing information relating to identification of customer carrying on
transaction with it or account holders and regarding suspicious transactions.

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54. Power of the Rastra Bank to issue directives: The Rastra Bank may issue necessary directives
regarding management procedure to be followed by the bank or financial institution while carrying on
functions and transactions pursuant to this chapter and other related work matters.

Chapter-8
Provisions relating to Supply and Recovery of Credits

55. Provisions relating to supply of credits: (1) A bank or financial institution shall supply credit only
after disclosing the purpose of such credit, subject to the directives of the Rastra Bank and the credit
policy determined by the Board of Directors.
(2) While supplying credit, a bank or financial institution shall obtain any movable or immovable
property acceptable to it as a security or an appropriate guarantee in a manner to safeguard its and
depositors interest.
(3) A bank or financial institution shall write to the concerned office to so withhold property
which it has been taken up as the security against a credit pursuant to this section that such property
cannot be registered in the name of or transferred to any person or transmission thereof and shall be
registered or transmission or withhold in the name of bank or financial institution.
(4) When requested to registration or transmission or withhold pursuant to sub-section (3), the
concerned office shall do registration or transmission or withhold pursuant to the request.
(5) The Rastra Bank may give directive to disburse credits for such class and in such area as
prioritized for the economic up-liftment of the persons belonging to a low-income and indigent class
and of the inhabitants residing in any specific geographical region than the bank or financial
institution shall disburse credit according to the prescribed directive.
(6) The matters related to the conditions, installment and interest of the credit borrowed by the
borrower from bank or financial institution shall be as per the conditions, installment and interest
mentioned in the deed or contract signed related to the credit transaction.
(7) The Bank or financial institutions shall take particulars of borrower, guarantor or firm,
director of company or institution if it is the borrower, shareholders holding share more than the
percentage as prescribed by the Rastra Bank, partners or person having ownership in any other form,
family member of all such persons and details even if they are stakeholders in any other place and
also shall take identity proof for taking actions when necessary, as per prevailing laws.
(8) While supplying credit, the bank or financial institution shall clearly mention the loan amount
provided to borrower and interest, penalties and time table for payment-submission thereof, in deed or
contract and provide such information to the borrower and also to the guarantor if any (9) The
borrower may request for the particulars of principal, interest, penalties and other fees paid or due
payable in respect of credit and also the deed or contract related document which has been taken
while providing credit and the bank or financial institution shall provide such particulars to the
borrower.

56. Supervision relating to proper utilization of credit amount: A bank or financial institution, by
preparing a monitoring schedule, shall monitor regularly, as to whether or not the borrower has
utilized the credit amount for the purpose for which credit was supplied to the borrower.

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57. Provisions relating to recovery of credit: (1) If the borrower fails to abide by the mentioned terms
of concerned deed or contract of credit transactions or fails to pay credit or interest thereon or
penalties within the time-limit stipulated in deed or contract, or if the licensed institution finds
through monitoring pursuant to section 56 that the borrower has not used the credit amount for the
purpose for which it has been supplied or misused it, the bank or financial institution may,
notwithstanding anything mentioned in the concerned deed or in the laws in force of credit
transactions, recover its principal and interest by auctioning or otherwise disposing of any property
pledged to it, or any collateral or security deposited with it, by the borrowers.
(2) Notwithstanding anything mentioned in the prevailing laws, if a borrower relinquishes in any
manner the title of the property registered or pledged to the bank or financial institution or if the value
of such collateral or security declines for any other reason, the bank or financial institution may ask
the borrower to furnish additional collateral or security within a period prescribed by it and the
borrower shall furnish the additional collateral or security within the time-limit prescribed by the
bank or financial institution.
(3) If the borrower fails to furnish the additional collateral pursuant to sub-section (2) or the
principal and interest cannot be recovered from the collateral or security, the bank or financial
institution may, in accordance with the prevailing laws in force, recover its principal or interest from
any other movable and immovable property owned by the borrower or to which the borrower has title.
(4) The amount of principal, interest and penalties due to the bank or financial institution and the
expenses incurred in collecting proceeds from auction or other disposal of a property made pursuant
to this section shall be deducted, and the balance, if any, shall be refunded to the concerned borrower.
(5) The bank or financial institution shall write to the concerned office for registration or
transmission of the assets auctioned or sold pursuant to this section in the name of the person who has
taken over it.
(6) When so requested for registration or transmission pursuant to sub-section (5),
notwithstanding anything contained in the laws in force, the concerned office shall make registration
or transmission in the name of such person who has taken over it.
(7) If no one offers a bid in an auction sale, under this section, of the movable and immovable
property pledged as the collateral or security, the bank or financial institution shall take over the
ownership of such property as prescribed.
(8) The bank or financial institution shall write to the concerned office for registration or
transmission of the property of which ownership has been taken over by such institution pursuant to
sub-section (7) in its name. When so requested, the concerned office shall make registration or
transmission of such property in the name of bank or financial institution notwithstanding anything
contained in the laws in force.
(9) If the previous owner of the property, taken over by a bank or financial institution or any
person in an auction, refuses or creates obstruction to allow its possession and use, than the
appropriate body of the Government of Nepal shall arrange for possession and use according to the
prevailing laws.
(10) No licensed institution shall hold up action for the recovery of credit which has been written
off subject to prevailing credit write-off byelaws.
(11) If borrower has failed to repay the credit borrowed from a bank or financial institution and
interest thereon and penalties within the repayment period of the credit deed or contract related to

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 credit transaction, the bank or financial institution shall write to the Credit Information Center
Limited to include such borrower in the black list in accordance with the laws in force.
(12) If a credit cannot be recovered even while taking action for the recovery of such credit
against any borrower pursuant to this section, the bank or financial institution concerned may, for the
purpose of recovering such credit, if such credit can be recovered, also from any other property of the
borrower situated abroad, institute action for recovery of credit including the withholding of property
in accordance with the laws in force.
(13) If a credit cannot be recovered even upon taking all actions on recovery of credit pursuant to
this section, the bank or financial institution may make a request to the Rastra Bank for necessary
provision to withhold and seize the passport of the borrower person and to deprive such borrower
from any facilities to be provided by the state. On receipt of such request, the Rastra Bank shall
forward the matter, accompanied by its opinion, to the Government of Nepal for necessary action.
(14) Any action taken by any bank or financial institution against anyone for recovery of credit
will not be a cause to prevent from instituting action against such individual on any offences
committed according to prevailing laws in force.

Chapter-9
Provisions relating to Accounts, Records, Returns and Reports

58. Accounts and records to be maintained accurately: (1) A bank or financial institution shall
maintain its accounts, ledgers, records, and books of accounts truly and correctly.
(2) The accounts to be maintained pursuant to sub-section (1) shall be so maintained according to
accepted principles based upon the double entry system as to clearly reflect the actual condition of the
transactions of the licensed institution.
(3) A licensed branch or office of foreign bank or financial institution shall prepare separate
accounts, ledgers, records and profit and loss account including financial statement disclosing its
assets, liabilities, income, expense, etc., without prejudice to the generality of sub-section (1) and (2).
(4) Save as otherwise permitted by the Rastra Bank, the accounts and other particulars to be
maintained pursuant to sub-section (1) shall be maintained at its registered office.

59. Balance Sheet, profit and loss account to be kept prepared: (1) A bank or financial institution
shall prepare its balance sheet, profit and loss account, cash flow statement and other financial
statements, as well, in such format and in accordance with such procedure as may be prescribed by
the Rastra Bank.
(2) A licensed institution shall, within three months after the expiry of a financial year, submit its
balance sheet and profit and loss account report to the Rastra Bank and shall publish such balance
sheet and profit and loss account particulars for information of public within the same time frame, as
prescribed by the Rastra Bank. A bank or financial institution shall prepare each financial year's
audited balance sheet and profit and loss account of transactions carried on within and outside Nepal,
and publish the same, within nine months of next financial year, in format as prescribed.
(3) If a bank or financial institution has a subsidiary company than in the balance sheet and profit
and loss account of bank or financial institution, it shall mention the transactions and financial
situation of such subsidiary company separately and as a whole.

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 (4) The format, subject matter, ways of approval of balance sheet and profit and loss account to
be prepared by any bank or financial institution, and also the particulars to be published pursuant to
this chapter shall be as prescribed or directed by the Rastra Bank.
(5) If there arises any doubts that the matters mentioned in any particulars published by the Bank
or financial institution pursuant to sub-section (2), is incorrect, incomplete, illusive or false than the
Rastra Bank shall give the information in writing and make the bank or financial institution to do as
per following:-
a) To publish the excluded or cause to be excluded or not mentioned topic, or
b) To re-publish the particulars after correcting the incorrect, incomplete, illusive or false
information, or
c) To publish after correcting other matters as prescribed by the Rastra Bank through
directives.

60. Audit Committee: (1) The Board of Directors of a bank or financial institution shall form an audit
committee under the coordination of non-executive director and consisting of three members.
(2) The chairman of bank or financial institution, coordinator of sub-committee and executive
chief shall not work in an audit committee formed pursuant to sub-section (1).
(3) The member of audit committee formed pursuant to sub-section (1) shall not be involved in
accepting deposit, supplying credit, making investment in securities, taking decision by spending
approved budget including day-to-day transactions.
(4) The meeting of audit committee shall be held, except in the situation where the meeting is
called by the Board of Directors, at least once in every three months.
(5) The working procedure regarding the meetings of audit committee shall be as determined by
the same committee.

61. Functions, duties and powers of audit committee: The functions, duties and powers of audit
committee shall be as follows:-
a) To monitor and supervise whether or not the account, budget and internal audit procedure,
internal control system of bank or financial institution is appropriate and if it is appropriate
than whether or not it is implemented.
b) To conduct internal audit of account and books of bank and financial institution and to
confirm whether or not such documents are prepared accurately as per prevailing laws,
regulation and directives of the Rastra Bank.
c) To examine or caused to be examine the management and functioning of regular management
and work performance of bank or financial institution so as get assured that the prevailing
laws has been fully implemented in bank or financial institution.
d) To monitor whether or not the functions and activities carried on by bank or financial
institution is as per this Act or rules formed under this Act, bye-laws, rules or given directives
and submit a report to the Board of Directors on this matter.
e) To recommend the names of three auditors for appointment of external auditor.
f) To suggest on matters as asked by the Board of Directors.

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62. Audit: (1) A bank or financial institution shall prepare its balance sheet, profit and loss account and
financial statements, as well, in such format and in accordance with such procedure as prescribed by
the Rastra Bank and have them audited within four months after the expiry of a financial year. Such
financial statement shall be signed by at least two directors, chief executive and the auditor.
Provided that, in case of audit of branch office of foreign bank or financial institution carrying on
banking and financial transaction on approval of the Rastra Bank, it shall be as prescribed by the
Rastra Bank.
(2) If any bank or financial institution fails to have its account audited within the period referred
to in sub-section (1) makes a request, accompanied by a reasonable reason, for an extension of the
period for audit, the Rastra Bank may extend a period of not more than two months.
(3) The external auditor shall submit a report of audit performed by him or her to the concerned
bank or financial institution and the Rastra Bank.

63. Appointment and Remuneration of Auditor: (1) The general meeting of a bank or financial
institution shall appoint an auditor.
(2) The general meeting shall not appoint the same auditor for more than three consecutive times.
(3) The general meeting shall appoint a chartered accountant in the case of a bank or financial
institution of Class "A", "B" and "C", and a chartered accountant or a registered auditor in the case of
a bank or financial institution of Class "D".
(4) The Rastra Bank shall appoint the auditor if the bank or financial institution did not or could
not appoint the auditor as pursuant to sub-section (1).
(5) In case the post of auditor remains vacant due to any reason than for remaining period the
Board of Director shall appoint another auditor.
(6) The remuneration of the auditor shall be as prescribed by the Rastra Bank if he or she is
appointed by the Rastra Bank, by the general meeting if he or she is appointed by the general meeting
and by the Board of Directors if he or she is appointed by the Board of Directors.

64. Disqualification for appointment as auditor: (1) Any of the following persons or any firm or
company or institution in which such person is promoter or partner shall not be eligible to be
appointed as an auditor of a bank or financial institution:-
a) A promoter, director, chief executive of a bank or financial institution or his or her family
member,
b) An officer, employee or internal auditor of a bank or financial institution,
c) A person working as a partner of director, chief executive or employee of bank or financial
institution,
d) A borrower, a person having significant ownership or associate person of the bank or
financial institution or a person having financial interest,
e) A person who is insolvent in Nepal or in foreign,
f) A person, firm, company or institution having subscribed one percent or more of the shares of
concerned bank or financial institution,
g) A person who has been punished by the court for a criminal offense and a period of five years
has not lapsed after he or she has served the punishment,
h) A person who is not eligible to be appointed as an auditor as per prevailing laws in force.

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 (2) A person appointed in the post of auditor of a bank or financial institution if found to be
disqualified to get appointment as auditor than such person appointment shall be deemed to be
automatically cancelled.

65. Returns to be submitted: (1) A bank or financial institution shall, at all time, provide all such
accounts, records, books, ledgers and other related statements to such documents for auditing as
demanded by the auditor in the course of performing audit.
(2) The officer responsible for providing such returns or replies for the purpose of sub-section (1)
shall furnish forthwith accurate returns and replies to the queries made by the auditor.

66. Functions, duties and powers of auditor: (1) The functions, duties and powers of an auditor shall be
as follows:-
a) To conduct audit of account and financial statements,
b) To prepare and submit the audit report including the account, balance sheet and profit and
loss account audited by him or her to the Board of Directors of bank or financial institution,
c) To inform the Board of Directors in matters where there is irregularities in functions and
activities of bank or financial institution or the functions has not been carried out
appropriately and such matters that could result in loss to the bank or financial institution,
d) To inform the Rastra Bank if there is probability of occurrence of following situations:-
1) If there is violation of the conditions prescribed by the Rastra Bank, while giving
license of bank or financial institution, or by rules, bye-laws or given directives, etc.
pursuant to this Act or subject to this Act,
2) If there arises adverse effect on daily functions and activities of bank or financial
institution,
3) If the auditor is prevented from issuance of the audit report or is forced to submit
incorrect audit report.
(2) The auditor has authority to examine, at all times, the account, books, records, vouchers
including every documents and data of bank or financial institution while fulfilling his or her duties
and the auditor can demand the necessary information and explanation, from the officer of bank or
financial institution, required while executing his or her work in appropriate manner and fulfilling his
or her duties.
(3) The auditor shall clearly mention the following matters in his or her report:-
a) Whether or not replies to the queries asked by him or her were given,
b) Whether or not the balance sheet, off-balance sheet transactions, profit and loss account,
cash flow statement and other financial statements, as well, have been prepared in such
format and in accordance with such procedure as prescribed by the Rastra Bank, and
whether or not they correspond to the accounts, records, books and ledgers maintained by
the bank or financial institution,
c) Whether or not the accounts, records, books and ledgers have been maintained accurately
in accordance with the laws in force,
d) Whether or not any officer of the bank or financial institution has done any act contrary
to the laws in force or committed any irregularity or caused any loss or damage to the
licensed institution,

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 e) Whether or not credit has been written off as prescribed by credit write-off bye-laws or
prescribed by the directives of the Rastra Bank,
f) Whether or not the transaction of bank or financial institutions have been carried on in a
satisfactory manner, as prescribed by the Rastra Bank,
g) Matters, which, should be made known to the shareholders,
h) Such matters prescribed by the laws in force and other matters prescribed by the Rastra
Bank as required to be mentioned by an auditor in his or her report,
i) Other suggestion from the auditor, which he or she seems is necessary to be given.
(4) After receiving the report from the auditor, the Rastra Bank if thinks necessary, shall give
direction to the auditor of bank or financial institution to carry on following additional activities:-
a) To submit additional information, that the Rastra Bank thinks is necessary in regards to
auditing,
b) To enhance the areas of auditing of transactions of bank or financial institution or its
subsidiary company,
c) To conduct other examination on any specific matters prescribed by the Rastra Bank or as
recommended by the bank or financial institution.

67. Recommend to take actions on auditor: (1) The Rastra Bank shall recommend the concerned
regulating bodies to remove an auditor, who have not fulfilled his or her duties pursuant to this Act,
from the list of auditors and not let him or her to perform an audit of any bank or financial institution
for a period ranging from one year to three year.
(2) The regulating body shall take actions against such auditors as recommend pursuant to sub-
section (1), according to the laws in force.

68. Auditor to certify: The auditor shall mark and certify the accounts, records, books and ledgers
audited by him or her by affixing his or her signature thereon and also mentioning therein the date on
which he or she audited them.

Chapter-10
Provisions relating to Merger or Merging or Acquisition of Bank or Financial Institutions

69. Merger or acquisition of bank or financial institutions: (1) A bank or financial institution can get
merged or merging with another bank or financial institution or a bank or financial institution can
acquire another bank or financial institution by fulfilling the prescribed procedure pursuant to this Act
or Nepal Rastra Bank Act.
(2) A class "D" financial institution can get merged with or make acquisition of same class
financial institution only.
Provided that, infrastructure development and bank or financial institution cannot get merged or
acquire each other.
(3) Notwithstanding anything contained elsewhere in this chapter, if from the inspection and
supervision report of the Rastra bank, any of the following situations is found in any bank or financial

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 institution than the Rastra Bank shall disclose such reason and give direction to such bank or financial
institution to get its assets, liabilities and business merged with other bank or financial institution:-
a) If capital fund is insufficient or the financial position is declining since last three years,
b) If there has been activities done against the interest of depositors and would adversely
affect the liabilities towards the depositors or if such situation prevails,
c) If there is necessity of enhancement in competitiveness capacity of the stability,
development and promotion of financial system in national and international level.
(4) Notwithstanding anything contained elsewhere in this chapter, if from the inspection and
supervision report of the Rastra bank, any of the following situations is found in any bank or financial
institution than the Rastra Bank shall disclose such reason and give direction or recommendation to
bank or financial institution to acquire or caused to acquire:-
a) If more than one bank or financial institution is in operation under the person, firm,
company of a single group and has unhealthy financial relation among them,
b) If it seems that the interest and right of depositor, public shareholder and other clients
could not be protected due to negative impact resulting from operation of bank or
financial institution in its present condition,
c) If the licensed institution is not capable to repay the liabilities due to increment in
systemic risk,
d) If the share is not issued to public group within determined time, if the issued share is
not sold or distributed or if the prescribed minimum proportional paid up capital is not
met,
e) If immediate corrective action is taken for three times or more than that or if the
governance system is in weak condition due to regular conflict in board of directors of
licensed institution.
(5) While giving order of merger or acquisition by the Rastra Bank to bank or financial institution
pursuant to sub-section (3) or (4), the Rastra Bank can also prescribe the procedure of merger or
acquisition in such order.

70. Application to be made for merger or acquisition: (1) If any bank or financial institution wishes to
be merged or merging another bank or financial institution, than both or more than two merging and
merged bank or financial institution shall make decision from each of its Board of Directors and make
a joint application, setting out the following matters, to the Rastra Bank for principle consent:-
a) Necessity and propriety of merger, merging of bank or financial institution, and general
projection of impact this could make in banking and financial sector and financial system,
b) Audited report of the last fiscal year of the merging bank or financial institution along
with its audited balance sheet, profit and loss account and cash flow statement, net worth
and other financial statements,
c) Provision made to protect the interest of creditors from whom loan has been obtained by
the merging bank or financial institution,
d) Valuation of the movable and immovable properties of , and actual details of the assets
and liabilities of, the merging bank or financial institution,
e) Employee management details of merging bank or financial institution,
f) Approved procedure according to prevailing company and securities related laws,

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 g) Preliminary agreement paper between institutions regarding merging,
h) Such other matters as prescribed by the Rastra Bank.
(2) If any bank or financial institution wishes to acquire another bank or financial institution than
the concerned two or more than two bank or financial institution shall make decision from their
respective Board of Directors according to special resolution of the general meeting and make a joint
application, setting out the following matters, to the Rastra Bank for obtaining principle consent:-
a) Necessity and propriety of acquisition of bank or financial institution, and general
projection of impact this could make in banking and financial sector and financial
system,
b) Audited report of the last fiscal year of the acquirer institution and targeted institution
along with its audited balance sheet, profit and loss account and cash flow statement, net
worth and other financial statements,
c) Employee management details of acquirer institution and targeted institution,
d) Approved procedure according to prevailing company and securities related laws,
e) Preliminary agreement paper regarding acquisition of bank or financial institution,
f) Such other matters as prescribed by the Rastra Bank.
(3) If an application is made pursuant to sub-section (1) or (2), the Rastra Bank shall make
necessary examination and during such examination, the Rastra Bank can discuss with the applicant,
as per necessity, and also demand for additional documents.
(4) If the Rastra Bank gets satisfied, from the examination conducted pursuant to sub-section (3),
in matters that the merging of bank or financial institution or acquisition of bank or financial
institution will not create any kind of negative impact in the development of national banking and
financial system, healthy competition and in compliance of prevailing laws, than the Rastra Bank can
give principle consent to proceed for merging of bank or financial institution or acquisition of bank or
financial institution and while giving consent accordingly, the Rastra Bank can prescribe conditions
or give order.

71. Provision relating to valuation of assets and liabilities: (1) After getting principle consent on
merger or acquisition of bank or financial institution pursuant to section (70), such bank or financial
institutions shall appoint a person, firm, company or institution, eligible to conduct bank audit, on
mutual agreement for valuation of assets, liabilities and transactions of each of the institutions and
shall inform about the same to the Rastra bank.
Provided that the bank or financial institutions can conduct valuation before making an
application to the Rastra Bank.
(2) The targeted institution shall do valuation of assets and liabilities, and transactions of later
period from the auditor, appointed from its general meeting or from the Board of Directors, as per the
authority delegated by general meeting, to do valuation of assets and liabilities, and transactions of
later period, after the bank or financial institution gets principle consent for acquisition pursuant to
section 70.
(3) The acquirer institution can do detail valuation of assets and liabilities of targeted institution.
(4) If the functions and activities carried on by valuator appointed pursuant to sub-section (1) or
(2) seem to be untrustworthy, then the Rastra Bank can order the concerned bank or financial
institution to appoint another valuator by removing him or her.

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 (5) The service, facilities of valuator shall be determined by the concerned bank or financial
institution.
(6) The valuator, while carrying on valuation of assets, liabilities, net worth and overall
transactions, shall use the established values, basis and methods in respect to such valuation.
(7) The Rastra Bank can give necessary direction regarding method, basis of valuation and areas
of valuation of assets and liabilities.

72. Provision relating to agreement: The bank or financial institution obtaining the principle consent for
merger or acquisition, except ordered by the Rasta Bank pursuant to this Act, shall enter an agreement
mentioning the following matters regarding merger or acquisition:-
a) Provision related to protecting interest of depositors, creditors and shareholders,
b) Provision relating to valuation method and adjustment of assets and liabilities of bank or
financial institution,
c) Management of investment and transactions, inter-institution ownership and inter-
institution transaction details, guarantee or commitment detail, management of non-
banking transaction, appropriate management of assets and liabilities,
d) Particulars of process, required time and cost for merger or acquisition,
e) Operational and management structure and name list of directors,
f) Provision relating to adjustment of level of employees, adjustment of services and
facilities of bank or financial institution obtaining principle consent of merger or
acquisition or of acquired bank or financial institution or of targeted institution,
g) Particulars of shareholders having significant ownership and of other shareholders,
h) If the merger or acquisition is in the form of new bank or financial institution, than name,
memorandum of association and articles of association, capital structure and class of
such institution,
i) In case of foreign bank or financial institution, approval letter from concerned regulatory
body,
j) In case of foreign bank or financial institution, matters about acquisition of business of
bank and financial institution located in Nepal or sale of whole business of such bank or
financial institution,
k) Grievance management system of stakeholders,
l) Process to be adopted for compliance of prevailing laws in force,
m) Such other necessary details as prescribed the Rastra Bank.

73. Provision relating to approval: (1) The bank or financial institution obtaining principle consent to
move forward in merger or acquisition process, shall pass the special resolution to that effect in their
respective general meetings and make a joint application including the agreement paper pursuant to
section (72), to the Rastra Bank for final approval of merger or acquisition activities.
(2) While doing examination of the application receipt pursuant to sub-section (1), the Rastra
Bank can demand for additional information or document if it seems necessary to request for
additional information or document from such bank or financial institution.
(3) While doing examination pursuant to sub-section (1) and (2), the Rastra Bank may grant final
approval to bank or financial institution by prescribing terms and limit for merger or acquisition

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 between each other, if it sees that the merger or acquisition of bank or financial institution is likely to
create a healthy environment, to give or not to give rise to the monopoly or controlled practice of any
bank or financial institution and possibilities of deep impact on overall banking and financial
structure, financial market and depositors and conduct fit and proper test of promoter having
significant ownership in institution formed after merger.
(4) If it seems inappropriate to give approval pursuant to sub-section (3), than the Rastra Bank
shall give notice and reason thereof to concerned bank or financial institution within forty five days.
(5) If it seems difficult to institutions having approval pursuant to sub-section (3) to comply with
provision mentioned in this Act and directives issued by the Rastra Bank due to the reason of merger
or acquisition, than the Rastra bank can give waiver, as prescribed, based on necessity and propriety.
(6) Such other matters related to merger or acquisition shall be as prescribed by the Rastra Bank.

74. Possibilities to acquire transaction: On receipt of prior approval from the Rastra Bank, any other
bank or financial institution can acquire or transfer any branch office or any assets and business of
such branch office of a bank or financial institution on mutual agreement.

Chapter-11
Voluntary Liquidation of Bank or Financial Institutions

75. Voluntary liquidation of a bank or financial institution: (1) Any bank or financial institution
wishing for voluntary liquidation shall make an application along with procedure of voluntary
liquidation to the Rastra Bank.
(2) Upon examination of application submitted pursuant to sub-section (1), if the Rastra Bank is
satisfied with matters that such bank or financial institution or branch or office of foreign bank or
financial institution in Nepal is capable to make full payment of its credit and liabilities, than the
Rastra Bank can give principle consent for voluntary liquidation along with conditions thereof.
(3) The bank or financial institution obtaining principle consent from the Rastra Bank pursuant to
sub-section (2) shall perform following functions:-
a) Provide such information to the Office of Company Registrar within seven days from the
date of obtaining principle consent,
b) Provide such notice to all depositors, creditors or concerned person within thirty days
form the date of receiving principle consent through fast, accurate and credible medium,
c) Publish notice related to it in national daily newspaper within thirty days from the date of
receiving principle consent,
d) To carry on such other functions as prescribed by the Rastra Bank.

76. Commencement of Voluntary Liquidation: (1) The commencement of voluntary liquidation related
activities of bank or financial institution shall begin from the date on which the Rastra Bank has given
final approval for voluntary liquidation.
(2) The bank or financial institution obtaining principle consent for voluntary liquidation pursuant
to section (75) shall perform following functions prior to obtaining final approval for voluntary
liquidation from the Rastra Bank:-
a) Full repayment or settlement of all deposits and liabilities within prescribed time,

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 b) Close the operation of transaction and not to carry on new transactions,
c) Not to exercise rights, other than the right that is necessary for voluntary liquidation.
(3) The Rastra Bank can issue necessary directives while carrying on functions and activities
pursuant to sub-section (2).
(4) If the person entitled to receive payment pursuant to clause (a) of sub-section (2) does not
present to receive the payment within prescribed time, then such amount shall be deposited in an
account directed by the Rastra Bank.
(5) The interest of depositors and other creditors shall not be adversely affected by a reason of
approval given for voluntary liquidation.
(6) After the completion of functions and actions, pursuant to this Act, of bank or financial
institution undergoing voluntary liquidation than such bank or financial institution shall submit an
audit report to the Rastra Bank of such liquidation.
(7) The Rastra Bank shall give final approval of voluntary liquidation to the bank or financial
institution completing activities pursuant to this section. The Rastra Bank shall cancel the banking
and financial transactions license of such bank or financial institution.
(8) The bank or financial institution undergoing voluntary liquidation shall keep separately, the
currently unclaimed payable deposit amount as prescribed by the Rastra Bank,
77. No impact on liabilities: There shall be no any impact on liabilities, as per this Act or other
prevailing laws in force, of shareholders, directors, chief executive, officers, employees or other
person of a bank or financial institution by a reason of liquidation of such bank or financial institution
pursuant to this Chapter.

Chapter-12
Compulsory Liquidation of Bank or Financial Institution

78. Power to make an application in the court for compulsory liquidation of a bank or financial
institution: (1) The Rastra Bank can make an application in the court to start action of compulsory
liquidation of any bank or financial institution pursuant to this Chapter and the notice of application
of such actions shall be published in national daily newspaper.
(2) The Rastra Bank shall also include following additional documents along with the application
made in the court for commencement of liquidation of any bank or financial institution pursuant to
sub-section (1):-
a) The details, including reason thereon of situations existing, pursuant to section 79, for
compulsory liquidation of bank or financial institution, and
b) Financial statements of bank or financial institution.
(3) Notwithstanding anything mentioned in sub-section (1), any of the following persons on
receipt of prior approval from the Rastra Bank, can make an application in the court clearly
mentioning the basis of situation existing, pursuant to section 79, for compulsory liquidation of bank
or financial institution:-
a) While requesting for payment of payable deposit, a joint application of the person
representing more twenty five percent of the deposit amount which is not payable or
more than one percent of the depositors or

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 b) Person capable to make an application for compulsory liquidation, as per prevailing laws
in force related to insolvency.
(4) If the court gives order to start process for compulsory liquidation of any bank or financial
institution on the basis of application pursuant to sub-section (1) or (3), than from the date of such
order the compulsory liquidation process of bank or financial institution shall be started.

79. Situation for compulsory liquidation of bank or financial institution: Under following situations,
there can be compulsory liquidation of a bank or financial institution:-
a) If there is due remaining, of matured deposit or deposit payable instantly or other financial
liabilities, unpaid on determined time,
b) If the capital fund of a bank or financial institution is negative,
c) If on the basis of inspection report of bank or financial institution, the Rastra Bank shall
recommend for liquidation of such bank or financial institution,
d) If the shareholder having significant ownership of bank or financial institution or officer does
functions and actions that creates frequent obstruction in interest of depositors and in
development of financial system,
e) If the bank or financial institution frequently violates this Act and directives given by the
Rastra Bank,
f) If there exist other situation determined by the Rastra Bank for compulsory liquidation of
bank or financial institution.

80. Power to suspend transactions: (1) After making an application in the court for compulsory
liquidation of bank or financial institution pursuant to section 78, the Rastra Bank shall give order to
suspend all the financial transaction of such bank or financial institution.
(2) While giving order to suspend financial transaction pursuant to sub-section (1), the Rastra
Bank can cancel the license of bank or financial institution.

81. Appointment of Liquidator: (1) The court in order to commence the functions and actions of
compulsory liquidation of any bank and financial institution, can give order to the Rastra Bank to
recommend for appointment of liquidator.
(2) The Rastra Bank shall recommend at least three persons for appointment in the post of
liquidator within fifteen days from the date of order issued by the court pursuant to sub-section (1).
(3) While recommending a liquidator pursuant to sub-section (2) to the court, a person having
experience in banking and financial sector from amongst practitioner licensed under the prevailing
law to carry on insolvency business shall be recommended by the Rastra Bank.
(4) Out of the three persons recommended pursuant to sub-section (2), the court shall appoint any
one person as a liquidator.
(5) After a liquidator is appointed pursuant to sub-section (4), the board of directors of such bank
or financial institution shall, ipso facto, be assumed to be dissolved and the service of all the
employees and officers appointed by such bank or financial institution shall, ipso facto, be terminated,
unless otherwise ordered by the liquidator.
(6) If the liquidator appointed pursuant to sub-section (4) gives resignation, he or she dies or if the
Rastra Bank thinks he or she is not capable enough to perform prescribed functions, than the Rastra

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 Bank shall make an application to the court, pursuant to this section, to remove him or her and
appoint another liquidator.
(7) The remuneration and service and facilities of the liquidator shall be as determined by the
court on recommendation of the Rastra Bank.

82. Functions, duties and power of liquidator: (1) The liquidator appointed for the purpose of
commencement of functions and actions of compulsory liquidation of bank or financial institution,
shall perform following functions and actions after his or her appointment:-
a) To publish notice in any English or Nepali national daily newspaper, for information of
the shareholders and concerned person of bank or financial institution, with in fifteen
days from the date of his or her appointment,
b) To send a notice including a certified copy of order relating to compulsory liquidation to
inform to the Office of Company Registrar and to the Institute established as per
prevailing laws in force for deposit security, within fifteen days from the date of his or
her appointment,
c) To affix or caused to be affixed notice of such order at a place of main location, where
bank or financial institution carries transaction and at its every branches, which is visible
for everyone,
d) To publish the notice in a television and a radio broadcasting nationwide at least once in a
week till four weeks from the date of appointment,
e) To perform such other functions as prescribed by the Rastra Bank.
(2) On receipt of notice pursuant to clause (b) of sub-section (1), the Office of Company Registrar
(OCR) shall register in the books related to such bank or financial institution about the order to
commence the activities of compulsory liquidation.
(3) In addition to the functions, duties and power mentioned elsewhere in this Act, following shall
be the functions, duties and power of liquidator, subject to the directives of the Rastra Bank:-
a) To take responsibility of branches, account, books, ledgers, records and assets of bank or
financial institution,
b) To carry on necessary daily activities of operation and management of bank or financial
institution,
c) To perform or caused to perform every functions to be performed on behalf of bank or
financial institution or in the name of it,
d) To appoint employee for providing assistance in his or her work performance,
e) To do necessary expense for carrying on functions and actions of operation, management
and liquidation of bank or financial institution,
f) To coordinate with the Institute, established as per prevailing laws in force for the
purpose of deposit security,
g) To exercise all the authority, exercised by the shareholder, general meeting, Board of
Directors and officer of the bank or financial institution,
h) To examine the business and financial situation of bank or financial institution,
i) To merge or transfer wholly or partially the assets and liabilities of a bank or financial
institution to another bank or financial institution, on approval of the Rastra Bank,
j) To borrow loan by mortgaging assets of bank or financial institution,

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 k) Where the liquidator considers that the sale of any assets or by terminating any contract
or liabilities will render benefits to the bank or financial institution, to sale such assets or
terminate such contract or liabilities,
l) To hire service of professional or qualified person, as per necessity, for assistance in his
or her work,
m) To do necessary discussion or compromise with any creditor or borrower of bank or
financial institution,
n) To collect, protect, sale and distribute the assets of bank or financial institution, as per
this Act,
o) To examine whether or not any director, officer, employee or any person has done
forgery, fraud or misrepresentation to bank or financial institution or depositors or
creditors and to take necessary actions against such person or to file any case or to take
any legal actions on behalf of bank or financial institution or to defense such actions,
p) If any assets of bank or financial institution is used by anybody than to take back such
assets or to take legal actions for taking those assets or amount from transactions that is
dismissed,
q) To prepare and submit to the court and Rastra Bank, the report of actions taken relating to
liquidation in a format determined by the Rastra Bank, in every three month period,
r) To do or caused to do all other functions and actions necessary for liquidation of bank or
financial institution,
s) To do such other functions as prescribed by the Rastra Bank.
(4) If any obstruction arises while exercising any power or fulfilling duties pursuant to this
chapter, than the liquidator can make an application to the court, for removal of such obstruction.
(5) The court can give appropriate order if the reason mentioned in the application submitted
pursuant to sub-section (4) seems reasonable.

83. Effect of order relating to liquidation: (1) When the court orders to commence the functions and
actions relating to compulsory liquidation of any bank or financial institution, than from such order,
in case of following matters it shall be as follows:
a) In case of any time period, related to any claim or power of bank or financial institution,
pursuant to prevailing laws in force is finished, than till six month, from the date of order
of court to commence the actions related to liquidation of such bank or financial
institution, the time period of such claim or power shall be automatically extended.
b) If the assets or property of bank or financial institution is withheld in anyway or is
mortgaged for loan borrowed by bank or financial institution, other than the situation
mentioned in clause (c), than such mortgaged is released automatically.
c) The function and activities of accepting deposit and borrowing loan of bank or financial
institution shall be automatically closed,
d) The court proceedings in any court against the bank or financial institution shall be
automatically suspended and unless and otherwise the court orders, the court proceedings
against such bank or financial institution cannot be revived.

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 Provided that, if there is any pending lawsuits in supreme court relating such bank or
financial institution or if there is necessity to take any release from supreme court than
the Rastra Bank shall make an application to the court.
e) No any interest or any other types of additional fee shall be charged on liabilities of bank
or financial institution.
f) The share of such bank or financial institution cannot be transferred, mortgaged or
transmitted.
However it can be transferred, mortgaged or transmitted on prior approval from the
Rastra Bank.
(2) If the liquidator gets information that the depositors and creditors interest of such bank or
financial institution will be damaged or will suffer loss from any kind of functions and actions carried
on in advance of six months immediately preceding the order of court for commencement of function
of compulsory liquidation, than the liquidator shall submit an application of such matter to the court
and also inform to the Rastra Bank about the same.
(3) On application submitted by the liquidator pursuant to sub-section (2), if the court sees any
functions and actions as follows than it can declare such functions and actions as invalid and void:-
a) If a decision to provide gift has been done,
b) If actions creates losses or damages the right and interest of depositors or creditors,
c) If transferred or paid before the date of clearance of credit or mortgage is released,
transferred or transmitted before payment of loan,
d) If the contract made creates additional liabilities in comparison to general or prevailing
liabilities arising during any transactions and functions carried on by bank or financial
institution,
e) If any agreement or transactions is carried out differing from the regular banking and
financial transactions allowed to carry on as per this Act,
f) If contract is entered for providing employment to associate person.
(4) The following transactions shall be void if any bank or financial institution has undergone
compulsory liquidation:-
a) Preferential transactions carried on in advance of six months immediately preceding the
commencement of compulsory liquidation proceedings or within the period of six months
after the commencement of such proceedings,
b) Preferential transactions carried on with the associated person in advance of one year
immediately preceding the commencement of compulsory liquidation proceedings or
within the period of one year after the commencement of such proceedings,
c) Any under-valued transactions have been carried on in advance of one year immediately
preceding the commencement of compulsory liquidation proceedings or within the period
of one year after the commencement of proceedings and the bank or financial institution
has undergone compulsory liquidation as a consequence of such transaction or other
under-valued transaction carried on after the commencement of the compulsory
proceedings.
d) All fraudulent transactions carried on in advance of two years immediately preceding the
commencement of compulsory liquidation proceedings or within the period of two years
after the commencement of such proceedings,

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 (5) The liquidator shall make an application in the court to have the transactions referred to in
sub-section (4) declared void.
(6) If the court is satisfied in the matter to declare any transactions void than the court shall issue
order as follows:-
a) To order the concerned person to pay to the liquidator some or all of the amounts paid by
bank or financial transaction in connection with such transaction,
b) To order the concerned person to handover to the liquidator the asset so transacted or an
amount equivalent thereto,
c) To order that the debt obtained by the bank or financial institution through such
transaction, or the collateral or guarantee furnished by the bank or financial institution for
that debt to be fully or partly remitted or released,
d) To order that any remission or assignment made or agreement entered into between the
bank or financial institution and any other person in consequence of the voidable
transaction be void, inoperative or unenforceable.
e) The court may also issue any such other additional order may be required to enforce the
order issued pursuant to this sub-section.
(7) If any loss or damage is suffered by the bank or financial institution by a reason of function
and action carried on pursuant to sub-section (3) or (4) by any director, officer, employee or other
person than such damage or loss shall be borne by them personally.

84. Record of assets and liabilities: (1) The liquidator shall immediately prepare a record of assets,
liabilities or contingent liabilities of bank or financial institution undergone compulsory liquidation
pursuant to this Act and shall submit a copy to the Rastra Bank and keep a copy in concerned bank or
financial institution.
(2) The following particulars shall be included in the records prepared pursuant to sub-section
(1):-
a) Liability of bank or financial institution towards depositors and creditors,
b) Particular of all assets and every types of liabilities of bank or financial institution and
estimated value thereto,
c) Contract entered by bank or financial institution to acquire service,
d) Important transactions carried on by bank or financial institution in advance of six
months immediately preceding the commencement of compulsory liquidation
proceedings.
(3) The liquidator shall update the records prepared pursuant to sub-section (1), quarterly and
shall make available to the creditors at the time of inspection.
85. Power to end the transactions: (1) Within six months from the date of order of court to commence
the compulsory liquidation proceedings of bank or financial institution, the liquidator can end the
following transactions of such bank or financial institution:-
a) Any contract entered by bank or financial institution relating to employment,
b) Contract made for any type of service, in which bank or financial institution is a party,
c) All functions and contract performed by bank or financial institution in capacity of a
trustee,

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 d) Any type of regular functions and actions of bank or financial institution or branch office
of bank or financial institution, subject to the necessity and circumstance,
e) Any kind of liabilities to be borne by the bank or financial institution without any
limitation,
f) Such other function and action as prescribed by the Rastra Bank.
(2) No any type of additional amount and compensation claim can be lodged other than the
liability, for transactions ended pursuant to sub-section (1), to be paid, payable or borne by bank or
financial institution till the date on which such transaction has been ended.

86. Notice for submission of claim: The liquidator shall publish notice as follows, within the time period
prescribed by the Rastra Bank, for person having any types of claim in bank or financial institution
undergoing compulsory liquidation pursuant to his Act, who shall submit particular mentioning his or
her claim and medium through which he or she can receive the amount within one month from the
date of publish or broadcast of notice as per this section:-
a) To publish notice in any national daily newspaper of English or Nepali language,
b) To affix or caused to be affix the notice in main location where transaction of bank or
financial institution is carried on and in every branches of it, in a place visible to everyone.

87. Liquidator shall either accept or reject the claim: (1) Within ninety days from the date of receipt
of claim pursuant to section (86), the liquidator shall make an examination on such claim and shall
inform the claimant that on the basis of evidence found, the claim has been either fully or partly
accepted or rejected, and also shall publish, about the same, through public notice.
(2) If the claimant, whose claim has been partly approved or rejected pursuant to sub-section (1),
have any additional evidence than he or she shall submit the claim including such evidence within
fifteen days from the date of receipt of notice thereto,
(3) If any amendment need to be made on claim submitted pursuant to sub-section (2) than the
liquidator can make full or partial amendment.
(4) If the claimant is not satisfied with the decision of liquidator pursuant to sub-section (1) or (3)
than within twenty one days from the date of receipt of notice of such decision he or she can make an
appeal to the court.

88. Classification of claims: (1) The liquidator shall separately classify the claim pursuant to section 87
as approved, partly approved or rejected claim.
(2) The partly approved claim pursuant to sub-section (1) shall be included in approved list for
approved portion and remaining portion shall be included in rejected claim list.
(3) While preparing claim list, the name of claimant, his address, place of payment, date, amount
and also detail on whether or not the claim is secured by collateral should be clearly mentioned in
such list.
(4) In case of any claim which is disputed and decision has not been made thereto, then such
claim shall be listed in disputed claim list.
(5) The liquidator shall list the approved and the claim on which value is not fixed, in the list
prescribed by him or her.
(6) The secured creditor's claim shall be classified separately.

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 (7) The approved claim shall be listed in priority order of payment pursuant to this Act.

89. Meeting of creditors: (1) For mutual discussion and consensus, the creditors of bank or financial
institution of which compulsory liquidation proceeding has commenced, can form a meeting of
creditors.
(2) The liquidator of bank or financial institution undergoing compulsory liquidation can carry on
talk, as per necessity, with creditors and borrowers of such bank or financial institution and maintain
consensus, subject to the conditions and directives given by the Rastra Bank.

90. Liquidation Plan: (1) After finishing the classification of claim pursuant to section (88), within thirty
days from thereto the liquidator shall prepare a detail plan of liquidation process of such bank or
financial institution and shall submit it to the court for approval and shall inform about same to the
Rastra Bank.
(2) The following matters shall be included in the liquidation plan to be submitted pursuant to
sub-section (1):-
a) Detail particulars of assets or liabilities of bank or financial institution, nature and
volume thereto,
b) Previous and estimated income and expenditure detail of bank or financial institution,
c) Detail particulars regarding continuance or cancellation of present financial transactions
of bank or financial institution,
d) Decision or order made from court,
e) Particulars of action taken for demanding compensation for offence or other illegal
activities done by director, officer or employee of bank or financial institution,
f) Detail particulars including claim classification and payment priority,
g) Plan relating sale of main assets or sale of group of assets of bank or financial institution
and liquidity of bank or financial institution,
h) Liability and a possible payment particular schedule showing amount to be payable to
depositor and creditor of bank or financial institution within upcoming ninety days,
i) Records and expenses of compulsory liquidation,
j) Such other matter prescribed by the Rastra Bank.
(3) The liquidator shall quarterly update the liquidation plan submitted pursuant to sub-section
(1).
(4) The liquidation plan, after approval from the court, shall be made available for inspection to
creditors, who have claim mentioned in such plan, of bank or financial institution.
(5) Notwithstanding anything mentioned elsewhere in this Act, no bank or financial institution
which has undergone voluntary liquidation shall be recapitalized by making full or partial investment.
91. Instant advance can be given to depositors: (1) Notwithstanding anything mentioned elsewhere in
this Chapter, at the time of distributing deposits, the liquidator can distribute at the most rupees one
lakh per account in the form of advance for account settlement to depositors of bank or financial
institution undergoing compulsory liquidation proceedings.
(2) The advance given pursuant to sub-section (1) shall be adjusted at the time of payment
pursuant to section 94.

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92. Power to sale assets: The liquidator can sale or auction or caused to sale or auction the assets, given
as security of approved claim of creditors of bank or financial institution undergoing compulsory
liquidation proceedings, including all other assets of such bank or financial institution as follows,
subject to the directives given by the Rastra Bank:-
a) Securities that is easily saleable in market, foreign currency or assets, that is immediately
saleable in market, at place of transaction,
b) Securities, given as collateral for credit of creditor, that is easily saleable in market, foreign
currency or the creditors having the other assets as collateral can sale themselves,
c) If the liquidator feels that reasonable price will not be received from sale or auction of assets
than to sale by any other means,
d) To do such other provision as prescribed by the Rastra Bank.

93. Notice of claim settlement: In order to settle the claim as per liquidation plan pursuant to section
(90), the liquidator shall publish and broadcast the notice disclosing the nature of claim, volume and
also payment priority.

94. Payment priority: (1) The bank or financial institution undergoing compulsory liquidation shall
settle the liabilities according to following order of priority:-
a) Expenses incurred for compulsory liquidation,
b) Amount up to deposit insurance collateral, pursuant to prevailing laws in force, not
exceeding the limit of total approved claim amount of depositors or if such amount is
paid to institute established, as per prevailing law relating to deposit amount, for deposit
insurance collateral amount equivalent thereto,
c) Deposit remaining after payment pursuant to clause (b),
d) Amount payable to employees of bank or financial institution for salary, allowance and
other liability,
e) Amount payable to Nepal Government, Local Government Bodies or Rastra Bank,
f) Amount payable to other bank or financial institution for outstanding fee or valuation,
g) Amount payable to other creditor or for other claim,
h) Shareholders pursuant to prevailing laws in force,
(2) Notwithstanding anything mentioned elsewhere in this Chapter, any assets unsold or
undistributed while selling or distributing pursuant to section 91, if any creditors agrees and make an
application for accepting the assets for an amount receivable by him or her from the bank or financial
institution than the liquidator can handover the assets to such creditors, subject to the criteria of such
assets value determined by the Rastra Bank.
(3) Notwithstanding anything mentioned elsewhere in this Chapter, if any asset is kept as security
for secured creditors than such assets shall be used only for fulfillment of liabilities of them.
95. Goods or amount unclaimed: If the concerned person within in the prescribed time mentioned in
the notice issued pursuant to this Chapter for return of one's amount or goods as per the particulars of
claim or liabilities, does not come to take return such amount or goods than such amount or goods
shall be kept under the responsibility of liquidator or other entity, as directed by the Rastra Bank.

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96. Decision of Liquidation: (1) For the liquidation of bank or financial institution i.e. under compulsory
liquidation pursuant to this Chapter and license being cancelled by the Rastra Bank, after the
functions of liquidation has been finished, the liquidator shall make an application to the court with
particulars of proceedings thereto.
(2) If the liquidator makes an application in the court pursuant to sub-section (1), the court shall
conduct necessary examination thereto and can give decision that such bank or financial institution
has undergone compulsory liquidation.
(3) The liquidator shall publish the decision given by court pursuant to sub-section (2) in each of
the English or Nepali language daily newspaper of national circulation at least one-one time and
while publishing thereof, the main subject written in order given by court and in report of liquidation
shall also be mentioned.
(4) After publishing notice pursuant to sub-section (3), the liquidator shall request to the
Company Registrar to remove the name of such bank or financial institution from the list of company
registration and the Company Registrar shall publish the notice of removal of name of that bank or
financial institution from the book of company registration, in Nepal Gazette.
(5) After publishing notice of removal of name, pursuant to sub-section (4), of bank or liquidation
undergoing liquidation in Nepal Gazette, the compulsory liquidation proceedings of that bank or
financial institution will end and such bank or financial institution shall be assumed to be duly
dissolved.
(6) If there is any liability, due to compulsory liquidation of bank or financial institution, pursuant
to this Act or prevailing laws in force, of any director, chief executive, officer, employee, shareholder
thereof or other person of such bank or financial institution then such liability will prevail.

97. Compulsory liquidation of bank or financial institution carrying transactions in more than one
country: The compulsory liquidation proceedings of branch office of bank or financial institution,
carrying on functions and transactions in more than one country, shall be determined by the Rastra
Bank keeping in mind the international practice.
Provided that, the compulsory liquidation proceedings of bank or financial institution working as
a subsidiary company of bank or financial institution, carrying on function and transactions in more
than one country, shall be pursuant to this Chapter.

98. Unacceptable Claims: The creditor and other person not submitting claim within the time prescribed
by the notice for submission of one's claim, pursuant to section 86, cannot submit any claim after the
time period for submission of claim is ended.
Provided that, there will be no any effect on interest of depositors by a reason of not having claim
upon amount available in depositor's account.

Chapter-13
Provision relating to Actions, Offences and Punishment

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99. Power to take regulatory actions: (1) The Rastra Bank can take any one or more than one action as
follows against bank or financial institution violating the rules, bye-laws, directives or order issued
pursuant to this Act or Nepal Rastra Bank Act or subject to it, depending upon the nature and
seriousness of violation:-
a) To warn or give warning in writing,
b) To get the Board of Directors to sign a bond for taking reformative steps,
c) To issue written order to not violate rule, bye-laws, directive or order issued pursuant to
this Act or Rastra Bank Act or subject to it or to take reformative action,
d) To restrain the bank or financial institution from distributing dividend to its shareholders
or issuing bonus share or restrict the activities for dividend distribution or issue of bonus
share,
e) To Impose limit or restriction on acceptance of deposit or supply of credit by bank or
financial institution or limit or restrict the activities of acceptance of deposit or supply of
credit,
f) To impose a full or partial restriction on the transactions of bank or financial institution.
(2) Under following situations, the Rastra Bank can suspend or cancel the license issued to bank
or financial institution for carrying on banking and financial transaction:-
a) If banking and financial transaction is not carried on within six months from the date of
receipt of license to carry on banking and financial transaction,
b) If banking and financial transaction is stopped without taking approval from the Rastra
bank,
c) If banking and financial transaction is operated against the interest of depositors or if
requested deposit or matured deposit is not refunded when asked or cannot refund,
d) If the rule, bye-laws, directive, order framed as per this Act or Rastra Bank Act or
thereunder or conditions prescribed by the Rastra Bank is violated or not complied,
e) If the bank or financial institution has obtained license by submitting false particulars,
f) If deposit security is not done as per prevailing law in force.
(3) If promoter, shareholder, director, chief executive, officer, employee or any other associated
person of any bank or financial institution violates the rules, bye-laws, directives or order issued
pursuant to this Act or Rastra Bank Act or thereunder, than the Rastra Bank can take any one or more
than one action as follows, depending upon the nature and seriousness of violation:-
a) To forfeit and withhold the share of concerned bank or financial subscribed by him or her
and can instruct the Board of Directors to sale those share to other person,
b) To instruct the Board of Directors to withhold or suspend some or all facilities including
meeting allowance, monthly salary received by Board of Director, director, officer and
other employee,
c) If from the inspection or monitoring of the Rastra Bank, the chairman, director, chief
executive officer or any person working as an chief executive or employee is found not
working in the benefit of depositors, shareholder and licensed institution than by giving
written notice he or she shall be removed from the post,
Provided that while imposing action on him or her under this clause, such person
shall be provided three to fifteen days' time for submission of explanation against offence
alleged upon him or her. Such person shall not be entitled to any kind of compensation or

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 facilities mentioned in employee bye-laws on getting retirement and shall be disqualified
for serving in service in any bank or financial institution having license from the Rastra
Bank, for a period of five years.
d) If action has been taken pursuant to clause (c), the director, officer or other employee
who comes under such action, did not acknowledge the letter of action or did not submit
explanation even after receiving the letter than the Rastra Bank can give information,
about the action taken, through public notice.
e) If any bank or financial institution pays or receives salary, allowance and other facilities
against this Act or if it seems unreasonable, than all such services, facilities or amount
applicable thereof and interest pursuant to prevailing laws in force shall be recovered
from person providing such services and facilities.
f) To order the concerned bank or financial institution to send written letter for taking
action, to entity in which the director, officer or employee of bank or financial institution
is associated professionally.
(4) If the amount payable by any bank or financial institution seems to be payable by reason of
negligence or wrong intention of any director, officer or employee than the Rastra Bank shall order to
recover such amount from such director, officer or employee.
(5) Within forty five days from the date of receipt of information of order issued pursuant to sub-
section (4), such director, officer or employee shall pay such amount personally.
(6) If the amount is not paid within the period prescribed in sub-section (5) than it shall be
recovered, similar to government dues, from account in the name of such director, officer or
employee or his or her family maintained at any bank or financial institution or from any movable or
immovable property of his or her or his or her family.
(7) If the Rastra Bank regulate, inspect, supervise any bank or financial institution or does any
other proceedings pursuant to this section and publishes the notice thereof publicly than the expense
incurred to publish or broadcast such notice shall be paid by such bank or financial institution.

100. Power to impose penalty: (1) The Rastra Bank shall impose penalty as follows to the bank or
financial institution if information to be provided pursuant to this Act or Rastra Bank Act or rules,
bye-laws, directive or order issued thereunder is not provided or documents and particulars to be
submitted within prescribed timeframe is not submitted or document, particulars, data or record
demanded by the Rastra Bank during monitoring, inspection or supervision or by any officer deputed
by the Rastra Bank for the same function, is not provided within the prescribed time frame:-
a) One lakh rupees per day for two weeks, from the date of expiry of time period,
b) One lakh fifty thousand per day for one month, from the date of expiry of time period,
c) One lakh fifty thousand per day at any time, after the date of expiry of time period
pursuant to clause (b).
(2) If promoter, shareholder, director, chief executive, officer, employee or any other related
person of bank or financial institution violates this Act or Rastra Bank Act or rule, bye-laws issued
thereunder, or directive or order or conditions issued thereunder or did not implement the direction
given by the Rastra Bank pursuant to clause (b) of sub-section (3) of section 99, than the Rastra Bank
seeing the nature and seriousness of violation can impose a penalty up to ten lakh rupees.

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 (3) If the penalty amount imposed pursuant to sub-section (1) is not paid to the Rastra Bank by
the bank or financial institution within three days from the date of knowledge of the decision than the
Rastra Bank shall recover it by deducting from the amount kept in the account opened by such bank
or financial institution in the Rastra Bank.
(4) The cash penalty received by the Rastra Bank pursuant to sub-section (1) and (2) shall be
deposited in the government fund.

101. Procedure for actions: (1) The Rastra Bank shall adopt following procedures, except otherwise
mentioned in this Act, while taking action pursuant to section 99 or imposing penalty pursuant to
section 100:-
a) Before taking proposed action or imposing proposed penalty, a written notice for
submission of his or her explanation, regarding proposed penalty or actions ,within seven
days from the date of notice, shall be given to the accused bank or financial institution or
person, stating in it the nature of activities done by him or her, description thereof and
imposable penalty amount or proposed actions in accordance thereof,
b) The concerned bank or financial institution or person shall submit a written explanation
within seven days from the date of receipt of written information pursuant to clause (a),
c) If the written explanation submitted pursuant to clause (b) seems reasonable than the
Rastra Bank can amend, restrict or cancel such accuses,
d) If the written explanation submitted pursuant to clause (b) do not seem satisfactory than
the Rastra Bank can take action pursuant to section 99 or impose penalty pursuant to
section 100 against such bank or financial institution.
(2) The other procedures to be followed by the Rastra Bank for taking action or imposing fine
pursuant to this section shall be as prescribed by the Rastra Bank.

102. Control over licensed institutions: (1) Notwithstanding anything contained elsewhere in this Act, if
the Rastra Bank is satisfied that a licensed institution has violated the Nepal Rastra Bank Act or this
Act or the rules or bye-laws framed hereunder or the orders or directives issued hereunder or is
satisfied, on the basis of the inspection and supervision report of the Rastra Bank, that a licensed
institution has failed or is likely to fail to perform the obligations required to be performed by the
licensed institution or that a bank or financial institution has not been operated smoothly or has done
anything contrary to the interests of its shareholders or depositors, the Rastra Bank may suspend the
Board of Directors of such licensed institution for a period not exceeding three years and take such
licensed institution under its control.
(2) After taking any licensed institution under its control pursuant to Sub-section (1), the Rastra
Bank may either itself carry out the management of such licensed institution or cause such
management to be carried out by any appropriate person, firm, company or institution appointed by it.
(3) The Rastra Bank shall, within one year after the management of a licensed institution has been
carried out by itself or through any other person, firm, company or institution pursuant to Sub-section
(2), perform, or cause to be performed, a financial and management audit, of such institution and
publicly publish a report thereof.

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 (4) If the Rastra Bank is satisfy from the report pursuant to sub-section (3) that the concerned
licensed institution is capable to fulfill the liability to be fulfilled by it or is in situation to operate
smoothly than the Rastra Bank can do as follows:-
a) To release the suspension , pursuant to sub-section (1), of the Board of Director of
licensed institution and handover the management of such institution to the same board of
director again, or
b) To oust the suspended board of director, pursuant to sub-section (1), of licensed
institution and form a new board of director form amongst the shareholder of licensed
institution and handover the management of such institution,
c) To call the general meeting of licensed institution and form a new board of director from
such meeting and handover the management of such institution,
d) To carry on any other actions that seems appropriate to the Rastra Bank.
(5) If Rastra Bank is satisfy from the report pursuant to sub-section (3), that the concerned
licensed institution is not capable to fulfill its liabilities to be fulfilled by it or is not in situation to
operate smoothly than the Rastra Bank can take any of the following actions out of the two in context
of such licensed institution:-
a) To commence the compulsory liquidation proceedings provisioned in chapter -12 of this
Act, or
b) To institute settlement action pursuant to Rastra Bank Act.
(6) The Rastra Bank prior to take control over the licensed institution pursuant to sub-section (1),
shall provide an opportunity to submit its explanation by providing fifteen days period, considering
the situation.
(7) All the expense incurred on functions and actions carried on by the Rastra Bank by taking the
licensed institution under control pursuant to this section, shall be borne by the concerned licensed
institution.
(8) The Rastra Bank shall give information about taking control over licensed institution by it,
pursuant to sub-section (1), to the Nepal Government, Ministry of Finance.

103. Offenses: (1) If any one does any of the following functions and actions that is against this Act or
rules, bye-laws, direction, order or condition or limit issued subject to this Act than it shall be deemed
to be an offence under this Act:-
a) If carries on the banking and financial transactions without obtaining a license,
b) If obtains license to carry on banking and financial transaction by providing incorrect or
false particulars,
c) If carries on banking and financial transaction against the conditions and limit of license
for carrying banking and financial transaction,
d) If deals in foreign exchange transactions without obtaining license,
e) If grants credit or make other investment against this Act,
f) If does irregularities while supplying credit, collateral valuation, recovering credit or does
any act related to thereto, if at the time of sale or auction of assets taken as collateral or at
the time of accepting as non-banking assets or at the time selling by accepting the non-
banking assets, it has done valuation at artificial value while taking collateral,

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 g) If the director, officer, employee and other person has done irregularities while doing
merger, acquisition, liquidation or auditing,
h) If does business to do offense of clause (a) to (g) or in any way assist to do such offense.
(2) The director, officer or employee serving in their position at the time of offense pursuant to
sub-section (1) or any other person assisting in the offense if proves that such offense was committed
without his or her consent or has fully tried to prevent such offense, except this situation, such offense
shall be deemed to be committed by him or her.
(3) If any officer or employee of branch of foreign bank, besides during regular transaction of
branch, transfers any assets of such branch in other country, gives permission thereof, gives authority
thereof or aids or abets in such act than it shall be deemed to be an offense under this Act.

104. Punishment: (1) Any person who commits any of the following offenses shall be punished as
follows:
a) If does any offense pursuant to clause (a) of sub-section (1) of section 103, shall be
punished with a fine not exceeding three hundred percent of the amount and with
imprisonment for a term not exceeding three years, along with the confiscation of the
amount involved,
b) If does any offense pursuant to clause (b) of sub-section (1) of section 103, shall be
punished with a fine not exceeding two hundred percent of the amount and with
imprisonment for a term not exceeding two years, along with the confiscation of the
amount involved, if any,
c) If does any offense pursuant to clause (c), (d), (e), (f) or (g) of sub-section (1) of section
103, shall be punished with a fine equal to the amount of confiscation equal to the
amount involved and with imprisonment for a term not exceeding one years, along with
confiscation of amount involved, if any,
d) If does any offense pursuant to clause (h) of sub-section (1) of section 103, shall be
subject to punishment which is not more than half the punishment given to main person,
along with the confiscation of the amount involved, if any.
(2) While calculating amount involved in transaction for the purpose of sub-section (1), all
transacted amount shall be taken into account to determine the amount.
(3) While imposing penalty pursuant to clause (a) to clause (d) of sub-section (1), if the figure of
the amount involved can be determined than as per the same and if the figure cannot be determined
than penalty shall be imposed at amount ranging from one million rupees to five million rupees.
(4) Any person involved in an act pursuant to sub-section (3) of section 103, shall be punished
with the amount pursuant to the amount involved and with imprisonment for a term not exceeding
five years.
(5) If any firm, company or institution does offense pursuant to section 103, than the concerned
director, officer, employee or concerned person of such firm, company or institution shall be punished
pursuant to this section and if such concerned person cannot be identified than the chief of such firm,
company or institution shall be punished pursuant to thereof.
(6) If anybody doing offense pursuant to section 103, is found keeping or hiding the assets in his
or her name, in the name of family, relative or any other person than such amount and assets
increased or cause to increase from thereto shall also be confiscated.

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105. Appeal: (1) Any bank or financial institution or director, officer, shareholder or employee of that
institution who is not satisfied with punishment imposed by the Rastra Bank under section 99 and
penalty imposed under section 100 may make an appeal to the Appellate Court within thirty five days
from the date of receipt of the order of such punishment.
Provided that, for making an appeal against the punishment imposed upon bank or financial
institution under section 99 or penalty imposed under section 100 by any shareholder, representative
selected from amongst the shareholders representing at least twenty five percent of the currently
maintained paid of capital shall make an appeal.
(2) While making an appeal against personal punishment or penalty pursuant to sub-section (1),
by any director, officer, employee or person if any order is made to penalize him or her or to pay any
amount than a deposit in a sum that is fifty percent of such amount shall be furnished.
(3) Any director, officer or employee of bank or financial institution ousted or removed from the
position shall not perform functions and actions being a director, officer or employee of any bank or
financial institution until a period of five years has not elapsed from the date of imposition of such
punishment or if has made an appeal in the court than until clearance is not received from such court
he or she shall not perform functions and actions being a director, officer or employee of any bank or
financial institution.

106. No restriction to impose punishment: If any person is found to have done an offense pursuant to
section 103 while he or she was serving in any position of bank or financial institution than by a
reason of he or she retired from such position or is not serving in the position, shall not restrict to
impose penalty pursuant to this Act.

Chapter - 14
Miscellaneous

107. Special provision relating to Infrastructure Development Bank: (1) The Rastra Bank can make
separate special policy provision or direction regarding incorporation, operation, inspection,
supervision, action, merger, acquisition or liquidation of Infrastructure Development Bank on the
basis of nature, volume and investment of Infrastructure Development Bank.
(2) Notwithstanding anything mentioned elsewhere in this Act, the maximum share to be
subscribed by the shareholder or promoter of Infrastructure Development Bank or the limit to make
investment by any foreign bank, financial institution or other corporate body in share, debenture or
other financial instrument in such bank shall be as determined by the Rastra Bank from time to time.

108. To insure security of deposit: The licensed bank or financial institution shall insure the security of
amount maintained in deposit account as per provision in prevailing laws in force or as prescribed by
the Rastra Bank.

109. Banking secrecy to be maintained: (1) The relationship between a bank or financial institution and
its customers and information pertaining to its accounts, records, books, ledgers and statements shall
not be informed to any person other than the concerned person.

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 (2) Notwithstanding anything contained in sub-section (1), if particulars or information of any
person maintained in bank or financial institution is provided as follows to anybody, the secrecy shall
not be deemed to have been violated:-
a) If the particulars or information is provided to the Rastra Bank pursuant to this Act or
Rastra Bank Act or the rules, bye-laws framed thereunder or the orders or directives
issued thereunder or if the particulars or information is provided in the course of
exchanging credit information between bank or financial institutions,
b) If any particulars or information is provided to a court in connection with lawsuit or other
legal action,
c) If concerned person's information is provided to the authorized official making
investigations, prosecution pursuant to prevailing laws in force or to investigation
committee in the course of examination and investigation or as per other prevailing laws
in force or provided such information to regulatory body,
d) If any particulars or information is provided to the auditor in connection with audit,
e) If any particulars or information is provided to the foreign countries pursuant to
prevailing law in force relating to reciprocal legal assistance,
f) If, in the course of investigation of any case of specific nature, the Government of Nepal,
Ministry of Finance, has made a request, accompanied by the reason therefor, for
providing details of the account of the bank or financial institution or any details of the
account of any person, firm, company or institution maintained with the bank or financial
institution, and if the Rastra Bank has given direction thereunder.
(3) The information or particulars obtained pursuant to sub-section (2) shall not be provided or
cause to provide to unauthorized person by anybody.
(4) The directors, officers, chief executives, employees, auditor, consultants and any concerned
person of a bank or financial institution shall not divulge the secrecy of the accounts, records, books,
ledgers and any other information of the bank or financial institution the secrecy of which is required
to be maintained in such a manner as to undermine the relationship between the bank or financial
institution and its customers, except in the situation mentioned in sub-section (2).

110. Power to give directive to freeze accounts: (1) In following situations, the Rastra Bank may, at any
time, give directive to concerned bank or financial institution to freeze account as to prevent the
withdrawal or transfer funds in the name of any person, firm, company or institution, in any way from
the account maintained in any bank or financial institution:-
a) In the course of carrying out any investigation of any type of offense, if any authorized
official makes a request to the Rastra Bank,
b) Troubleshooting the offence regarding financial investment in anti-money laundering and
terrorism activities, to maintain national interest by controlling corruption, organized
crime and the offensive activities that could occur in transaction of banking and financial
institution.
(2) It shall be the duty of concerned bank or financial institution to comply with the directive
given by the Rastra Bank pursuant to sub-section (1).

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111. Claim or title to deposits: (1) Claims of any person other than the actual depositor to deposits made
with a bank or financial institution shall not be entertained.
(2) In the event of the death of the depositor, the person willed by him or her, if any, and if such
beneficiary also dies or if no person has been willed by the depositor, the surviving person from
amongst his or her relatives, in the following order, shall have first title to such deposits:
a) Husband or wife living in a joint family,
b) Son or daughter, or adopted son or daughter, or widowed daughter in law, living in a joint
family,
c) Father, mother, grand-son, or grand-daughter living in a joint family,
d) Husband or wife, son, daughter, father or mother, daughter in law or married daughter
who is living separately,
e) Grand-father, grand-mother, brothers, wife's brother's son/daughter, sisters, living in a
joint family, grand-father, grand-mother who is living separately,
f) Step-mother living in a joint family, grand-son or unmarried grand-daughter from the
son's side living separately,
g) Brothers, wife's brother's son/daughter }, sisters, nephew, niece, living separately,
h) Uncle, widowed aunt, sister-in-law(elder or younger brother's wife) or grand-daughter in
law living in a joint family,
i) Married sisters, grand-daughter in law living separately.
(3) If there is no one in the order of priority referred to in sub-section (1) and no claim over such
deposit from heir as per prevailing laws in force, the deposit shall be deposited in Banking
Development Fund of the Rastra Bank and shall be utilized for banking development.
(4) Notwithstanding anything contained in the laws in force, no amount deposited with a bank or
financial institution shall be handed over to anyone without the approval of the person who has the
title thereto under sub-section (1).

112. Particulars of unclaimed deposits: (1) A bank or financial institution shall submit to the Rastra
Bank particulars of deposit accounts which have remained un-operated, and of those the title to which
have not been claimed under this Act for ten years, within the first month of each fiscal year.
(2) A bank or financial institution shall publish the notice to claim the amount pursuant to sub-
section (1) in national daily newspaper once in every five years. The bank or financial institution shall
also keep the detail particulars of thereto in its website.
(3) If there is no one to claim the amount pursuant to sub-section (1) even within twenty years,
than such amount shall be deposited in Banking Development Fund of the Rastra Bank and shall be
utilized in banking development.

113. Recovery from or confiscation of deposits: If any business or transaction is carried on by pledging
as collateral or security the amount deposited with a bank or financial institution, or if amounts are
deposited with a bank or financial institution with misappropriated funds belonging to the Nepal
Government or body owned by the Government of Nepal, or with funds obtained committing any
functions and activities which is deemed to be an offense under the laws in force, or with funds
collected through any activity relating to terrorism or banking , financial crime or organized crime,

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 the such deposits may be confiscated or such collateral or security or misappropriated or other funds
may be recovered from such deposits in accordance with the laws in force.

114. Recovery from the directors: If any directors in the course of transaction of bank or financial
institution, is found taking amount or assets resulting in personal benefit than the bank or financial
institution shall recover such amount or assets from such directors.

115. Claims not to be filed : Even after having knowledge or enough reason to believe that the director is
carrying on any transactions that is in his or her personal benefit or will result in loss or damage to the
bank or financial institution, anyone carries on any transaction with such director or his or her
representative than such person cannot make any kind of claim with bank or financial institution over
such transactions.

116. Nepal Government to be plaintiff: (1) Nepal Government shall file lawsuits regarding offenses
mention in section 103, being a plaintiff and such lawsuits shall be assumed to be included in
schedule 1 of prevailing act relating to government lawsuit.
(2) Anybody can give written or oral complaint against any director, officer, employee, borrower
or any other person committing any offense pursuant to section 103 in nearby police office, along
with proof thereto. It is not necessary to provide name while giving complaints like this.
(3) The Rastra Bank shall provide necessary assistance in investigation, prosecution and lawsuit
filing, and all other activities like trial f, of offenses referred in section 103.

117. Provision relating to transparency: (1) In regards to transparency of transactions, bank or financial
institution or branch of foreign bank or financial institution shall publish interim report regarding its
financial situation and situation of risk, in every three months.
(2) The minimum matters to be included in report prepared pursuant to sub-section (1) shall be as
prescribed by the Rastra Bank.

118. Provision relating to protection of consumer's interest: The Rasta Bank may do following
activities for protection of interest of consumers:-
a) To ensure that the licensed bank or financial institution are carrying on the financial
transaction pursuant to law and providing financial services to consumers in transparent and
clear manner,
b) To coordinate in matters of protecting consumer's interest in financial sector,
c) To collect necessary information to bring improvement in protecting consumer's interest and
to bring financial literacy in banking sector.

119. Exemptions and facilities: (1) Any deed of credit against collateral of movable or immovable assets
not exceeding one million rupees supplied by a bank or financial institution to any citizen of Nepal or
any institution established in accordance with the laws in force for agriculture, cottage and small scale
industry, irrigation, hydro-power generation and for any other enterprise as specified by the
Government of Nepal shall not be required to be registered.

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 (2) The repayment period of credit and of deposit shall be as prescribed by the bank or financial
institution.
(3) No revenue stamp fee shall be charged on any kind of document related to bank or financial
institution.

120. Management Expenses: The Rastra Bank can issue necessary direction regarding preliminary,
establishment, administrative, professional, management and other expenses of a bank or financial
institution.

121. Property details to be submitted: The director, office and chief executive of bank or financial
institution shall prepare and submit the particulars of all movable or immovable assets and liabilities
in the name of his or her or in the name of his or her family to concerned bank within sixty days from
the date of expiry of each fiscal year and shall inform to the Rastra Bank about the same. While
submitting details, the source of income also needs to be disclosed.

122. The credit, liability and the right in collateral of a credit can be purchased or sold:
Notwithstanding anything mentioned in prevailing laws, credit provided by any bank or financial
institution or liabilities accepted by it or right, of collateral in movable or immovable assets acquired
or provided in the form of collateral for its protection, can be purchased or sold, except otherwise
mentioned in agreement relating to credit.

123. Resolution of disputes: (1) If any disputes arises between bank or financial institution, than such
disputes shall be resolved on mutual consent.
(2) If the dispute could not be settled on mutual consent pursuant to sub-section (1) then the
Rastra Bank shall solve the dispute through conciliation process or by adopting other dispute
resolution options pursuant to prevailing laws in force.
(3) The decision of Rastra Bank in pursuant to sub-section (2), shall be final.

124. Not to liable for act done in good faith: (1) The officers or employees of bank or financial
institution, the Rastra Bank shall not be held individually or collectively liable for any act or action
done or taken in good faith under this Act, Rastra Bank Act, or the rules, bye-laws framed hereunder
or as per the orders or directives issued thereunder.
(2) If any kind of lawsuit is filed against the Rastra Bank, bank or financial institution or officer
thereof in relation to any loss or damage caused or likely to be caused by any act done or purported to
be done in good faith while complying with this Act, or Rastra Bank Act, or rules, bye-laws framed
hereunder or issued order or directives thereunder, the concerned institution shall bear the expenses of
such lawsuit.
Provided that the concerned person shall be held individually liable for any act done with
malicious, recklessness or mala fide intention and the Rastra Bank or bank or financial institution
shall not bear the expenses of lawsuit filed in connection with such issues.

125. Acts and actions not to be invalidated: No act and action done and taken by a director or the Board
of Director shall be invalidated only for the reason that there has been any irregularity in the

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 appointment of the director or in the formation of the Board of Director or any vacancy in the office
of director.

126. Power to form study committee and sub-committee: (1) The Rastra Bank can form an expert study
committee comprising representative from the Rastra Bank, bank or financial institution and
concerned entity and experts in order to submit report by studying in overall areas of banking and
financial law, credit recovery, stability of financial sector and contemporary improvement of
financial system.
(2) The Rastra Bank can also form sub-committees, as per necessity, for the purpose of sub-
section (1).
(3) The functions, duties, power and facilities of study committee formed pursuant to sub-section
(1) and sub-committees formed pursuant to sub-section (2) shall be as prescribed by the Rastra Bank.

127. Oath Taking: (1) Each director, officer, chief executive or employee appointed in a bank or financial
institution shall, prior to assuming the responsibilities of his or her office, take an oath of secrecy and
office in the format prescribed in the schedule.
(2) The chairman shall take the oath pursuant to sub-section (1) from the Rastra Bank, director
and chief executive from the chairman and other officer and employees from the chief executive or
from the official prescribed by him or her.

128. Amendment of memorandum of association and articles of association: Notwithstanding anything

mentioned elsewhere, amendment in memorandum of association and articles of association of bank
or financial institution shall not be effective until approved by the Rastra Bank.

129. This Act to govern: (1) The matters contained in this Act or the rules, bye-laws, procedures framed
hereunder or orders or directives issued pursuant to rule framed subject to this Act shall be governed
by thereof and the other matters shall be governed by the Rastra Bank Act and the laws in force.
(2) The monitoring, inspection and supervision and settlement related proceedings of bank or
financial institution established pursuant to this Act shall be as per the Rastra Bank Act.

130. Power to remove difficulties: (1) If there arises any difficulty in the enforcement of any provision
contained in this Act, the Rastra Bank may, with the approval of the Government of Nepal, issue
necessary orders to remove such difficulty.
(2) While issuing orders pursuant to sub-section (1) to remove difficulty, the reason and propriety
of issuance thereof shall also be disclosed.

131. Power to give orders or directives: The Rastra Bank can give order or directive, as per necessity, to
bank or financial institution, subject to this Act or rules, bye-laws framed under this Act.

132. Power to frame rules or bye-laws: (1) The Rastra Bank if finds necessary, may issue and implement
rule or bye-laws, as per necessity, on any matters for implementation of this Act.
(2) The rule framed by the Rastra Bank pursuant to sub-section (1) shall be effective only after
being approved from the Nepal Government.

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133. Power to frame bye-laws and procedures: (1) The Board of Director for operation of institutional,
administrative and professional transaction of bank or financial institution in well managed way, shall
frame bye-laws, subject to this Act or conditions, limit and criteria prescribed by the Rastra Bank
under this Act, in following matters after getting approval from the Rastra Bank:-
a) Regarding appointment, promotion, transfer, termination, salary, allowance, gratuity,
pension, leave, carry on, discipline and conditions of service of employee and formation
of such service,
b) Regarding financial administration of the bank or financial institution,
c) Regarding credit write-off,
d) Regarding such other matters as prescribed by the Rastra Bank from time to time.
(2) Besides, the matters mentioned in sub-section (1), the Bank or financial institution can make
procedures, as per necessity, on following matters:-
a) Regarding the procedure of meeting of the board of director and general meeting,
b) Regarding delegation of powers of the board of director to director, chief executive,
officer or employee,
c) Regarding conditions relating to contract entered on behalf of bank or financial
institution,
d) Regarding the procedure for using the seal of bank or financial institution,
e) Regarding valuation of collateral security kept while supplying credit or valuation of non-
banking assets to be auctioned or sold,
f) Regarding such other functions and actions as required to be carried on by bank or
financial institution pursuant to this Act,
g) Regarding document obliteration ] matters,
h) Regarding such other matters as prescribed by the Rastra Bank from time to time.

134. Repeal and saving: (1) The Banks and Financial Institutions Act, 2063 has been hereby repealed.
(2) Any acts done and actions taken under the Acts repealed pursuant to sub-section (1) shall be
deemed to have been done and taken under this Act.

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without prior permission in writing from the publisher.
The Institute of Chartered Accountants of Nepal (ICAN) has created and maintains this publication as a service to its
members, students and the community. This publication is intended to assist the students in their preparation for the
exams and is not intended to provide or substitute legal or professional advice. This publication has been prepared so
that is current as at the date of writing. You should not act or refrain from acting, or rely on any statement expressed in
this publication. You should make and rely on your own inquiries in making any decisions or giving any advice.
No warranty is given as to the correctness of the information contained in this publication, or of its suitability for use
by you. ICAN is not liable for any direct, indirect, special or consequential losses or damages of any kind, or loss of

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profit, loss or corruption of data, business interruption or indirect costs, arising out of or in connection with the use of
this publication or the information contained in it, whether such loss or damage arises in contract, negligence, tort,
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