Nepal Rastra Bank Act 2058 (नेपाल राष्ट्र बैंक ऐन २०५८)
Nepal Rastra Bank Act 2012 सर्ब प्रथम आएको र यहि ऐनको अधिनमा रहेर वि. सं. 2013 बैशाख 14 गते Nepal Rastra Bank को स्थापना भयो । नेपाल राष्ट्र बैंकलाई नेपालको केन्द्रिय बैंकको रुपमा स्थापित गर्नु र भारतीय मुद्रालाई विस्थापित गर्ने मुख उदेश्य सहित Nepal Rastra Bank Act 2012 जारी गरिएको थियो। पछि यहि ऐन संशोधन भएर Nepal Rastra Bank Act 2058 भएको हो।
Objectives of the Nepal Rastra Bank Act 2058
- To establish Nepal Rastra Bank
- To Manage and Operate Nepal Rastra Bank
- To Formulate necessary monetary policy and foreign exchange (FOREX) policy.
- To maintain a relationship with the government
- To maintain the stability of the price
- To consolidate the balance of payment
- To develop an efficient system of payment
- To regulate other banks and financial institutions. Such as
- Issue license
- Issue Directives
- Inspection, supervision, and monitoring
- To increase public trust in the banking system
- To increase public banking access
- To assign the role of a central bank such as
- Issuing banknotes/coins
- Act as a bank of bank & function as a lender of the last resort
- Act as financial advisor/agent of the Government of Nepal etc.
Objectives of Nepal Rastra Bank
- To formulate necessary monetary policy and foreign exchange policy.
- To maintain and promote financial stability and liquidity required in banking and financial sectors.
- To develop a healthy secure and efficient system of payment.
[Explain these three points in details for 10 marks questions]
The objectives of Nepal Rastra Bank as per the above three points can be drawn as maintaining economic stability, sustainable economic development, the balance of payments (BoP), increase public trust and increase public access in the banking system.
(माथि ३ वटा Points हरुलाई संक्षिप्तमा लेख्नु पर्दा नेपाल राष्ट्र बैंकको मुख उदेश्य भनेको आर्थिक स्थायित्त्व कायम गर्दै दीगो आर्थिक विकास, Balance of Payment (BoP ) र जनविश्वास कायम गरि समग्र जनता समक्ष सहज बैंकिंग सेवाको पहुँच पुर्याउनु हो।)
Functions of Nepal Rastra Bank
- To issue bank notes and coins
- To formulate necessary monetary policy and implementation
- Determination of foreign exchange (FOREX) rate
- Management and operation of FOREX reserve
- Issuing license to Bank and Financial Institutions
- Act as a bank of bank & function as a lender of the last resort
- Act as financial advisor/agent/banker of the Government of Nepal
- Develop and promote an efficient payment system
- Perform other activities required to obtain other objectives
[Note – write these functions only if asked for Nepal Rastra Bank, otherwise write functions of central bank]
Prohibited Functions of Nepal Rastra Bank
- Not to accept deposit from the general public
- Not to provide loan to the general public
- Not to accept any kinds of financial gifts
- Not to purchase any share capital of an organization and public enterprises
- Not to operate any types of business
- Not to acquire movable and immovable properties
Facilities to NRB by NRB Act 2058
- Exemption of all types of taxes and charges on income gain and capital transactions
- No need to pay the registration fee for registering activities
- No requirement of revenue stamp on NRB related documents
- Exemption on all types of fee, charges, customs, duty in the import of coin, gold, metals, papers, chemical which are later used for printing banknotes and minting coins.
Formation of NRB Board
There shall be Board of Directors in the bank consisting of the following members-
- 1 Board, 7 Members (4 internal + 3 External ) chaired by the Governor
- Appointed by the Government of Nepal
- 5 years of tenure
- Board members can be appointed any numbers of time
- Oath by Cheif Justice
- After retirement, board members can not work in other B&FIs at least for three years
- Member can give resign to Government of Nepal
Secretory of Ministry of Finance
Appointed by Government of Nepal from amongst the person renowned in the field of Economic, Monitory, Banking, Finance and Commercial Law
Functions/Duties/Rights/Power of Board
- To frame monetary and foreign exchange policies
- To take necessary decisions with regard to denominations of the banknotes, coins, the figures, size, metal, materials for printing notes, and other materials. Also, frame appropriate policies with regard to their issue.
- To frame necessary policies for causing the supervision and inspection of B&FIs.
- To frame the applicable policies for other B&FIs.
- To frame policies with regards to the appointment, promotion, transfer, dismissal, remuneration, pension, provident fund, leave, code of conduct and other terms and conditions relating to the services of the employees of the bank.
- To approve the necessary policy for the issue of license to commercial banks and financial institutions.
- To approve the limit of the loan to be provided to the Government of Nepal by the bank.
- To fix the amount, limit, terms and conditions about providing loan to the B&FIs.
- To make a decision with regards to the bank’s membership to international organizations.
- To frame the policy for investment and mobilizations of the Bank’s financial resources.
Appointment of the Governor
- Government of Nepal, the council of Minister shall appoint the Governor as per the recommendation from recommendation committee. Recommendation committee consists of three members chaired by the Minister of Finance, and the other two members ex-governor and renowned person in baking and financial sector.
- The committee recommends at least three candidates renowned in the field of economic, monetary, banking, finance, commerce, management commercial law and from among the deputy governor.
- 5 years of tenure.
- Governor once appointed can be appointed for another one tenure,
- Governor takes oath from the chief justice.
- Governor can give resignation to the Government of Nepal.
- Governor cannot work in other B&FIs after the retirement or after resignation.
- Government of Nepal, the council of Minister shall remove the governor, deputy governor, or other directors. To remove Governor, three members committee should be formed. The committee led by ex-chief justice and inspect the work of Governor for one month. If the committee finds the disqualification of the Governor then government of Nepal, the council of Minister can remove Governor.
Functions/Duties/Power of Governor
The functions, duties, and power of the governor shall be as follows
- Implement decisions made by the board.
- Operate and manage the bank.
- Systematize the functions to be carried out by the bank.
- Represent the Nepal Rastra Bank in the international platform.
- Implement and cause to implement the policies relating to monetary and foreign exchange matters.
- Fix the interest rate related policies of other B&FIs.
- Formulate the policy related to the liquidity of the other B&FIs.
- Formulate the terms and conditions of the gold and other precious metal related transactions.
- To fix the fees and commission of B&FIs.
- To take the decision about operating and expanding the branches of the B&FIs.
- To make the necessary arrangement for the development & operation of the information system of other banks.
- To formulate the policy relating the revocation of the license provided to commercial banks.
- To take decisions on any other subject matter to the power delegated by the BOD.
Appointment of Deputy Governor
- There shall be two deputy governors.
- Government of Nepal, the council of Minister shall appoint deputy governors on the recommendation of Governor.
- While making the recommendation for application of Deputy Governor, recommend double the number of the post falling vacant from among the special class officers of the banks on the basis of their performance and capability.
- 5 years of tenure.
- No provision for reappointing.
- Take oath from Governor.
- After retirement, deputy governor cannot work in other B&FIs at least for three years
Provisions relating to the Audit Committee
- 1 audit committee, 3 members chaired by Director, 1 member from the chief of the internal audit department, and 1 member from among the senior officer.
Functions/Duties/Power of Audit Committee
- Submit audit report to the NRB board.
- The audit committee can recommend for the preparation of budget and audit procedure, support to prepare a periodic balance sheet and other documents.
- Supervise the implementation of the NRB policies of measures.
- Audit managerial and performance appraisal of the NRB entity.
- Frame bylaws relating to audit under the provision of prevailing law.
Financial Management of the NRB
(Highlight 5 points)
- Capital of the bank
- Accounting System used to calculate income and expenditure of NRB
- Allocation of Income
- Allotment of Expenditure
- Capital of the bank – The capital of the bank shall be 5 billion rupees (5 Arab Rupiya).
- Accounting System –The bank shall prepare an account of its profit and loss as per Nepal Accounting Standardand bank shall use International Accounting standard (IAS) as per the requirement.
- Allocation of Income –The bank shall allocate the net income as follows
Monetary Liability Fund
Financial Stability Fund
General Reserve Fund
Min. 10% and Max. up to cover the capital expenditure
All the income form re-valuation of the foreign exchange
Government Reserve Fund
Rest of the income
- Allocation of Expenses –The bank shall allocate the net loss as follows
- All the general expenditure of general operation shall be debited from the General Reserve Fund (GRF).
- All the capital debited from the General Reserve Fund (GRF).
- Re-valuation loss shall be debited from the Revaluation Fund (RF).
- Budget – Prepared by NRB and approve by NRB Board and sent to the Government of Nepal.
Relationship Between Government and NRB
- Work as bank of the government
- Work as a financial agent of the government
- Work as a financial advisor of the government
- NRB provide consultation to reform the financial laws
- Provide advice to the consultation relating to external debt (बाहय ऋण सम्बन्धि आवश्यक सुझाव दिन्छ। ऋण आन्तरिक वा बाह्य हुन सक्छ)
- Issuing currency for the government of Nepal
- Policy formulator of the government of Nepal (Monetary Policy, FOREX policy)
- Policy enforcer
- System builder for payment, settlement house, credit creation, clearing house.
यी कामहरु नेपाल राष्ट्र बैंकले सरकारको तर्फबाट गरिदिनु पर्ने हुन्छ।
Conditions to declare problematic B&FIs by NRB
कुन कुन अवस्थामा नेपाल राष्ट्र बैंकले अरु बैंक तथा वित्तीय संस्थाहरुलाई समस्याग्रस्त घोषणा गर्न सक्छ?
- Act against the interest of depositor, shareholder, and promoters.
- Act of not fulfilling the financial liabilities.
- If B&FIs are going toward insolvency (टाट पल्टिने अवस्थातिर जादै छ भने).
- If B&FIs submit the fake document and acknowledge later. (while getting a license)
- If B&FIs are unable to maintain the capital structure and capital fund.
- If B&FIs initiate the process of volunteer liquidation undue delay. (स्वच्छिक बिघटनमा ढिलाई)
- If B&FIs carry out the businesses which are restricted by NRB.
- Unable to pay the due amount.
Action taken by NRB to Problematic B&FIs
- Can issue an order to issue new shares.
- NRB can suspend the right of voting for the shareholder.
- Stop the dividend payment to any other amount to the shareholder.
- Determine the limitation to the bonus, salary, compensation and other expenses.
- Can maintain efficient arrangement to liquidity management/corporate governance.
- Can limit the transaction of B&FIs.
- Prohibit for doing specific business.
- Can issue an order to remove director/manager/staff.
- Can suspend the BOD.
- Can issue an order to delist from the stock market.