KATHMANDU, Jan 30: Nepal Rastra Bank (NRB) has made it mandatory for bank and financial institutions (BFIs) to set up a corporate social responsibility (CSR) fund and allocate at least 1 percent of their total net profit in the fund.
Issuing a circular last week, the central bank said the money allocated to the fund from the net profit of a previous fiscal year should be spent in social activities in the next fiscal year. The central bank has also laid down the areas where the BFIs can spend the CSR fund. Central bank officials say that the new requirement was introduced to streamline and make the distribution and spending of such fund more systematic.
While there was no requirement previously, BFIs used to spend a certain amount of money on various CSR activities every year.
According to the new circular, BFIs can spend on social projects in education, health, natural disaster management, environment protection, culture promotion, improvement of infrastructure on rural areas, income skills development for socially deprived sector, financial literacy and programs related to consumer protection, among other direct and indirect expenditures. However, they have to make open calls for proposals and select the project from among the specialized organizations working in such areas.
Similarly, direct donation or financial support on health and education expenses of deprived sector or building physical infrastructure, equipment purchase and operation cost of organizations working on such areas can also be counted as the expenses of CSR fund.
Direct or indirect expenses supporting Nepal to meet 17 sustainable development goals set by the United Nations is another area where BFIs can plough their funds as part of the CSR spending. BFIs can now also open child day care centre for their staffers and count it as the expenses of the CSR, according to the circular.
However, the NRB has also set restrictions on the use of CSR fund. BFIs cannot use the CSR fund for brand promotion activities. They can, however, use the logo mentioned in the expenses they have funded. Similarly, their CSR funding should not be concentrated in a single area (like health and education) or any geographical location.
The NRB has also prohibited the use of fund that has personal or political benefit to the board directors of the BFIs. A separate working procedure outlining the use of fund, process of project selection, areas, geographical location, operation of fund and management, should be drafted and implemented, according to the circular.