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KATHMANDU, June 20: Nepal Rastra Bank (NRB) has turned lenient towards cross-border investments, enforcing soft measures for Nepalis to invest abroad while easing the conditions for foreign investors to inject money inside the country.
The central bank through enforcing the fourth amendment to ‘Foreign Investment and Foreign Debt Management Regulations, 2021’ has come up with a flexible policy in the segment. Facilitation of Non-Resident Nepalis (NRNs) in the country’s secondary market, permitting foreign investors to bring in capital in convertible currencies and consent to Nepali IT companies to invest in foreign companies, are among the major policy revisions that the NRB has stepped forward to implement.
In the new rule, the NRB has made it easier for NRNs to apply for shares in investment companies. "While applying for shares of a joint venture investment company operated by a NRN, it shall not be deemed to constitute an obstacle for the purposes of this regulation even if prescribed amount deposited in the account of a foreign investor prior to taking government approval of the foreign investment," reads the revised condition of the NRB.
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Likewise, the NRNs are now permitted to open their bank accounts in Nepali currency while they bring in the foreign investment. As of now, the NRNs have been permitted to do so only in foreign currencies. The enforcement of the new rule has paved the way for the NRNs to issue primary shares of up to Rs 8.50 billion for their companies.
The NRNs have set up Nepal Development Fund with paid up capital of Rs 10 billion, which includes five percent investment of the Government of Nepal. Now, they are permitted to float primary shares amounting 85 percent of the paid up capital, aimed for subscriptions by the Nepalis residing abroad.
Similarly, the foreign investors are now allowed to deposit in Nepali banks and financial institutions the returns that they earned on Nepal’s land and the amount they are taking for repatriation in Nepali rupees.
Meanwhile, Nepali IT companies are now permitted to invest up to US $1 million in foreign countries. “The maximum limit of foreign exchange that the information technology related firm can receive for investment abroad will be equal to 50 percent of the average foreign exchange earned by the firm from exporting information technology-related services in the last three fiscal years or US $1 million or its equivalent, whichever is lower,” reads the NRB’s new rule.
The NRB says Nepali citizens or companies wishing to invest abroad will be provided with the foreign exchange facilities. This facility can be obtained in 22 convertible currencies, including the Indian rupee and the US dollar, defined by the central bank.
It has been stipulated that such companies, after receiving approval to invest abroad, must submit an audit report to the NRB within six months of the end of each fiscal year. If the foreign currencies received under this condition are found to be misused in other areas rather than for specified purpose of investment in the IT sector, the concerned are supposed to face legal actions,” the regulations stipulate.
