KATHMANDU, March 17: Nepal Rastra Bank (NRB) has reduced the capital requirement threshold to around one-fourth for the foreign banks to operate their branches in Nepal.
Enforcing Foreign Bank Branch Licensing Policy 2022 on Wednesday, NRB has reduced the capital requirement for the foreign bank to US $20 million from USD 80 million. The central bank in this regard has scrapped ‘Policy Provision for Opening Branch Office by Foreign Bank or Financial Institutions in Nepal 2010.’
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Earlier, NRB had maintained the capital requirement for foreign banks at an equivalent amount of those needed for the Nepali banks. Currently, a Nepali bank must maintain paid-up capital of Rs 8 billion to operate in the local market.
According to an official of NRB, the central bank this time has enforced an umbrella policy to be applied for entire foreign banks aspiring to open their branches in Nepal. Earlier, the NRB in its discretion used to set different criteria for foreign financial institutions to permit them in the domestic market. “The central bank has taken a lenient policy also to welcome more foreign financial institutions in the domestic market,” the official said.
“The foreign bank or financial institution willing to operate a branch office in Nepal must produce a no-objection letter and a letter indicating regulation and 3 supervision of branch offices to be made in an integrated manner from the central bank or licensing authority of its home country,” reads NRB new policy. In addition, the bank concerned needs to deposit five percent of the assigned capital in the US dollar in advance in an NRB account.
