Kathmandu. The government is going to introduce a new provision for the capital increase of the Nepal Rastra Bank, the regulator of banks and financial institutions.
The government is preparing to introduce a new provision for increasing the capital of the central bank through the bill amending the Nepal Rastra Bank Act, 2058 BS. The bill is currently registered in the House of Representatives.
In the bill, the government has made a provision that the capital can be increased at the request of the Rastra Bank. In the current Act, there is a consultation in place of a request.
Similarly, the bill also does not bring a provision requiring the Board of Directors to request the government to reinstate the capital in case the capital decreases in the audited annual financial statement. If such request is made, the government has to provide the amount to the Rastra Bank through an interchangeable credit instrument issued in cash or at the prevailing interest rate within 90 days from the date of expiry of the fiscal year.
As per the existing Act, the capital of the NRB will be Rs 5 billion.
Similarly, the government is going to make it mandatory to establish 4 funds in the Nepal Rastra Bank through the bill. As per the bill, the central bank will have to set up an ordinary reserve fund, a revaluation reserve fund, a financial development fund and a special reserve fund.
General Reserve Fund: The Rastra Bank shall establish an ordinary reserve fund to bear the net loss and increase the capital.
Revaluation Reserve: This fund should be established to account for the profit or loss of revaluation on financial instruments, foreign currency, gold and other assets invested by the Rastra Bank.
Financial Development Fund: The Rastra Bank should establish this fund in such a way that it does not exceed 5 percent of the total monetary liability for the stability of the financial sector, increase financial access, strengthen the financial system and develop the overall financial sector.
Special Reserve TAG_CLOSE_span_24 Fund: The bank shall establish this fund for a special purpose not exceeding 2% of the total monetary liability of the bank pursuant to the decision of the Board of Directors of the Rastra Bank.TAG_OPEN_span_24
The operation and use of the financial reserve fund and special reserve fund shall be as determined by the Board of Directors.
The present Act does not mention anything about the establishment of these funds.
