Bank & Financial Institution Act 2073 2017 by Nepal Rastra Bank. NRB BAFIA Act Banking Sector Act Nepal. Bank and Financial Institution Act, 2073 (2017), Nepal Gazette Published by Government of Nepal, Part 67 Kathmandu, Baishakh 10, 2073 BS (April 23, 2017 AD) (Pre-Additional Number 1A), Part-2, Government of Nepal, Ministry of Law, Justice and Parliamentary Affairs.
The Act, enacted by Legislature-Parliament pursuant to Sub-Article (1) of Article 296 of Constitution of Nepal as mentioned hereunder, is hereby published for the information of general public.
An Act enacted for amendment and consolidation in laws relating to Banks and Financial Institutions
Whereas, it is expedient to amend and consolidate forthwith the prevailing laws relating to banks and financial institutions in order to increase confidence of general public towards the overall banking and financial system of the country; to protect and promote the rights and interests of depositors; to provide quality and reliable banking and financial services to general public through healthy competition among banks and financial institutions thereby making national economy sustainable and strong; and to maintain financial stability and make necessary legal provisions concerning establishment, operation, management, regulation, inspection and supervision of banks and financial institutions;
Now, therefore, be this Act enacted by the Legislature-Parliament pursuant to in Sub-Article (1) of Article 296 of the Constitution of Nepal
Chapter- 1 – Preliminary
- Short Title, Extension and Commencement: (1) This Act may be called as “Banks and Financial Institutions Act, 2073 (2017).”
(2) This Act shall extend to the whole territory of the state of Nepal and also enforce to a branch or liaison office opened outside of Nepal by a bank and financial institution incorporated in Nepal.
(3) This Act shall come into force at once.
- Definitions: Unless the subject or the context otherwise requires, in this Act,-
(a) “Court” means Commercial Bench of the Court designated by Government of Nepal with approval from the Supreme Court by publishing a notice in the Nepal Gazette.
(b) “Chairperson” means the Chairperson of the Board of Directors and the word also includes the Executive Chairperson.
(c) “License” means the license issued by the Rastra Bank under this Act in the name of a bank or financial institution to carry on banking and financial transactions.
(d) “Licensed transaction” means banking and financial transaction to be carried out by bank or financial institution by obtaining license under this Act.
(e) “Bank or financial institution” means a bank or financial institution which has obtained a license pursuant to this Act for carrying on banking or financial transaction.
(f) “Significant Ownership” means a situation where any person has, solely or jointly in association with other person or institution, subscribed two percent or more shares of a bank or financial institution and due to which he/she/it may have influence on management of the bank or financial institution.
(g) “Borrower” means person, firm, company or institution obtained credit from bank or financial institution.
(h) “Credit” means the amount lent by bank or financial institution to any person, firm, company, institution or other business enterprise subject to repay principal, interest or other charge within certain time limit, direct or indirect commitment, interest or other charge of the credit, re-finance, restructuring and renewal of the credit, guarantee and other commitment issued for the repayment of such credit and the term also includes any type of credit as specified by the Rastra Bank by publishing public notice.
(i) “Chief Executive” means the Chief Executive Officer having responsibility of operating a bank or financial institution and the term also includes the Executive Chairperson and Managing Director working as the Chief Executive.
(j) “Office” means the registered and central office of bank or financial institution and the term also includes any branch office of a bank or financial institution located within Nepal and outside from the territory of Nepal and a branch office of a foreign bank or financial institution located in Nepal.
(k) “Net worth” means the amount remaining after deducting the external liabilities from the grand total of the assets to be mentioned in the balance-sheet of a bank or financial institution.
(l) “Non-executive Director” means the Director except the Executive Director performing daily function of bank or financial institution.
(m) “Current account” means an account of funds deposited with a bank or financial institution by the costumer as may be withdrawn at any time on demand.
(n) “Paid-up Capital” means the portion of the capital paid up on behalf of shareholders out of the issued capital of a bank or financial institution.
(o) “Risk-weight asset” means the total assets calculated by multiplying the amounts coming under each heading of on-balance sheet and off-balance sheet operations of a bank or financial institution by the risk-weight on the format as prescribed by the Rastra Bank.
(p) “Liquid assets” means the cash balance of a bank or financial institution, the balance remained in the current account, the balance maintained in Rastra Bank and such assets of a bank or financial institution specified as liquid assets by the Rastra Bank from time to time.
(q) “Prescribed” or “as prescribed” means prescribed or as prescribed in the Rules or Byelaws framed under this Act.
(r) “Securities” means a share, stock, bond, debenture, debenture stock, or mutual investment scheme certificate issued by a bank, financial institution or body corporate; certificate, saving bond or bond issued by Government of Nepal or by a corporate body against the guarantee of Government of Nepal, and the word also includes other stock specified by the Securities Board as the stock to be transacted or transferrable through the stock market to sell or exchange such stock.
(s) “Articles of Association” means Articles of Association of a bank or financial institution framed pursuant to the prevailing laws relating to companies.
(t) “Deposits” means amounts deposited in current, savings or fixed accounts of a bank or financial institution through costumer with or without accruing interests and the term also includes such amounts which a bank or financial institution accepts through different financial instruments as specified by the Rastra Bank from time to time.
(u) “Deposit Guarantee” means the act of security of deposit or guarantee of such deposit pursuant to Section 107.
(v) “Office bearer” means a Director, Chief Executive, Company Secretary and officer level employee of a bank or financial institution authorizing to make decision on any matter.
(w) “Family” means Director’s husband or wife, son, daughter-in-law, daughter, adopted daughter, father, mother, stepmother including elder brother, elder sister-in-law, younger brother, younger sister-in-law, elder sister and younger sister of the Director, to be cared or nurtured by him or her.
Provided that the term does not include the member of the family being separated with partition of the family property and carrying out his/her profession or business on his/her own.
(x) “Capital” means the authorized capital, issued capital and paid up capital of a bank or financial institution.
(y) “Capital Fund” means the total sum of primary capital and supplementary capital of a bank or financial institution as specified by the Rastra Bank and the term also includes other fund or amount as specified by the Rastra Bank from time to time.
(z) “Infrastructure Development Bank” means an Infrastructure Development Bank incorporated to carry on financial transactions as mentioned in sub-section (5) of section 49.
(aa) “Letter of credit” means a letter written by one bank or financial institution in the name of any other bank or financial institution stating thereon to accept cheques, drafts, or bills of exchange of any specified person within the limit of the amount specified therein.
(bb) “Memorandum of Association” means the Memorandum of Association of a bank or financial institution framed pursuant to the prevailing companies’ law.
(cc) “Primary Capital” means the funds of a bank or financial institution listed under such headings as the paid-up capital, share premium, non-redeemable preference shares, general reserve fund and accumulated profit and loss, and the term also includes such other funds listed under other headings as may be prescribed as primary capital by the Rastra Bank from time to time.
(dd) “Acquiring Institution” means the holding bank or financial institution acquiring an institution being licensed pursuant to this Act.
(ee) “Acquisition” means the act of acquisition by a bank or financial institution to another bank or financial institution having settled the accounts of entire assets and potential liabilities by winding up the legal capacity of such bank or financial institution and the term also includes the act of accepting all
contractual liabilities by the acquiring bank or financial institution created by the target institution before its merger.
(ff) “Saving Account” means the account containing details of the amount deposited by any customer for saving in a bank or financial institution.
(gg) “Bank” means a corporate body incorporated to carry on banking and financial transactions pursuant to Sub-Section (1) of Section 49 and the term also includes a branch office of a foreign bank located in Nepal, a branch office opened outside of Nepal by a bank incorporated in Nepal and an Infrastructure Development Bank to carry on functions pursuant to sub-Section (5) of Section 49 and branch office of the same bank.
(hh) “Banking and financial transaction” means the banking and financial transaction as referred in Section 49.
(ii) “Bonus share” means a share issued as an additional share to shareholders, by capitalizing the saving earned from the profits or the reserve fund of a bank or financial institution, and this term also includes the increase of the paid up value of a share by capitalizing the saving or other fund.
(jj) “Fixed Account” means a periodic account of funds deposited with a bank or financial institution for a specified term, during such term normally the deposited amount cannot be withdrawn.
(kk) “Rastra Bank Act” means Nepal Rastra Bank Act, 2058 (2002).
(ll) “Rastra Bank” means the Nepal Rastra Bank.
(mm) “Targeted Institution” means the bank or financial institution to be merged in the acquiring institution under this Act with entire assets and liabilities.
(nn) “Audit Committee” means the Audit Committee a referred to in section 60.
(oo) “Dividend” means the cash dividend, interim dividend or bonus share to be given by a bank or financial institution according to this Act and prevailing laws.
(pp) “Liquidator” means the person appointed for carrying out the functions of liquidation of the bank or financial institution according to an order of a court or a resolution passed by a meeting of the creditors and the word also includes an office carrying out the function of liquidator.
(qq) “Leasing” means the act of acquiring only the possessory right of a movable or immovable assets for specified period of time by retaining the ownership thereof with the bank or financial institution and subject to pay amount therefor in specified timetable by the costumer according to an agreement.
(rr) “Off-balance-sheet transaction” means letter of credit, letter of guarantee, letter of acceptance, commitment, swap, option and transaction in advance concerning foreign exchange having possibility of bearing liabilities by a bank or financial institution and the word also includes transaction of the instruments as specified by the Rastra Bank from time to time.
(ss) “Financial institution” means a corporate body incorporated to carry on banking and financial transactions pursuant to sub-sections (2), (3) or (4) of Section 49 and the terms also includes a branch office of a development bank, finance company, micro finance institution or a branch office of a foreign finance company located in Nepal or a branch office opened in abroad by a financial institution incorporated in Nepal.
(tt) “Financial interests” means a situation where any Director, shareholder subscribing one percent or more shares or Chief Executive or family member of such person or the person, company, or corporate body having authority to appoint a Director subscribes ten percent or more shares of a firm, company or corporate body separately or jointly, such person or persons are deemed to have financial interests in the institution having ten percent or more shares, and the term also include the interests which the Rastra Bank specifies as having financial interests depending upon the nature and circumstance of financial transaction.
(uu) “Branch of a foreign bank or financial institution” means a branch of any bank or financial institution having obtained license from Rastra Bank under this Act in order to carry out banking and financial transactions having established a branch office in Nepal.
(vv) “Electronic transaction” means the business of accepting deposits, making payments and transferring funds through telephone, telex, computers or magnetic tapes or similar types of other electronic equipment; and this term also includes the transactions to be carried on through terminal, automated teller machines and cash dispensing machines, as well as those to be carried on through charge cards, debit or credit card.
(ww) “Prospectus” means the prospectus to be published by bank or financial institution pursuant to Section 8.
(xx) “Branch Office” means any branch, sub-branch, unit, area, and representative or liaison office of a bank or financial institution within and outside Nepal and any office including branch or representative office or liaison office or other office of a foreign bank or financial institution in Nepal.
(yy) “Share” means the divided portion of share capital of a bank or financial institution.
(zz) “Shareholder” means a person having ownership in a share of bank or financial institution.
(aaa) “Director” means a member of the Board of Directors and the term also includes the Chairperson of the Board of Directors as well as an Alternate Director.
(bbb) “Board of Directors” means the Board of Directors constituted pursuant to Section 14.
(ccc) “Promoter” means a person who, having undertaken to subscribe at least one share, signs the Memorandum of Association and the Articles of Association in the capacity of Promoter for establishment of a bank or financial institution pursuant to this Act.
(ddd) “Affiliated person” means a Director, official of bank or financial institution or his/her family member or any firm, company or institution having substantial ownership of such person or any person, firm, company or institution having substantial ownership in such firm, company or institution or beneficial owner with substantial ownership thereof.
(eee) “Independent Director” means the person appointed to the position of Independent Director pursuant to Sub-Section (3) of Section 14.
(fff) “Voluntary Liquidation” means the situation in which a bank or financial institution initiates voluntary liquidation pursuant to Chapter 11.
(ggg) “Creditor” means a person or a body corporate to whom/which a bank or financial institution has to pay and the term also includes a depositor and debenture-holder for the purpose of liquidation process.
(hhh) “Hypothecation Loan” means the loan disbursed having entered into an agreement between a bank or financial institution and a Borrower against the collateral security of the stock having retained such stock under possession of the concerned borrower.