Mode of Investment in Nepal

Foreign Investment can be made in any industry in the following forms

• through investment in shares in a new or in existing industry, in foreign currency,
• reinvestment of earnings derived from earlier investment
• lease financing of specified equipment like airlines, ships, machineries and equipment (up to prescribed threshold),
• investment in venture capital funds (VCFs) by institutional foreign investors,
• investment in listed securities through secondary market by VCFs,
• acquisition of shares/assets of existing companies,
• issuance of securities in foreign capital market,
• investment made through technology & know-how transfer agreement

Note:

1. Investment can be made either in cash or in the form of tangible / intangible assets, e.g. machinery and equipment.
2. “Investment in listed securities through secondary market by VCFs” can be done only after notification by Nepal Government.
3. Foreign Financial Institution, with recommendation of ministry and approval of NRB can invest in a Foreign Invested Industry, in the form of project loan or project finance.
4. As per Nepal Gazette dated 14th Nov 2079,the minimum ceiling for foreign investment has been reduced to NPR 20 million by Nepal Government (earlier it was 50 million).

Mode of Investment in Nepal

Approving Authority for Foreign Investment

Project size                                                    Approving Authority

Upto NPR  6 billion                                    Department of Industries (DOI)

More than NPR 6 billion                         Investment Board of Nepal (IBN)

Starting a business in Nepal by establishing a new industry

Procedure for establishing industry with projects up to NPR 6 billion

1. Project Identification and Initial Consultation at Department of Industries (DOI)
2. Application for foreign investment approval at DOI including all required documents
3. Approval of foreign investment by DOI
4. Issuance of foreign investment approval letter by DOI
5. Incorporation of a company at Office of Company Registrar (OCR) by making application with required documents and payment of registration fee
6. PAN/VAT registration at Inland Revenue Office (IRO), Business Registration at Local Authority, Industry Registration at DOI
7. Opening of Bank Accounts
8. Written notification to Foreign Exchange Facilitation Unit of NRB located at single point service center for bringing foreign currency into Nepal
9. Inflow of FDI into Nepal and deposit in concerned commercial bank after necessary verification by the bank
10. Application to NRB for recording/accounting of foreign currency brought into Nepal
11. Environmental Assessment as required under related law
12. Application for business license from concerned regulating authorities as applicable
13. Commissioning of Industry

Note:

1. Prior approval for foreign investment or approval of NRB will not be mandatory for Interested foreign investors to send / remit foreign currency into Nepal through banking system for feasibility study /pre-operating expenses. Such amount, up to 3% of their paid-up capital may be considered /accounted as foreign investment later if expenses are certified by auditor and are properly accounted while doing endorsement of foreign investment in NRB.
2. Prior approval of NRB shall be required to bring foreign currency into Nepal for foreign investment where such foreign investment results in change of share ownership.

Documents required for establishing a new industry with projects uptoNPR 6 billion

At DOI for FDI approval

• Project Report / Feasibility Report in two copies
• Duly filled up online application form
• Joint Venture Agreement (JVA), in case of more than one investor
• In case foreign investor is a natural person, his/her notarized copy of the Passport or other ID proving citizenship and personal bio-data
• In case foreign investor is a company, notarized copy of Certificate of Incorporation, including Memorandum of Association and Articles of Association, Directors and shareholders register, company profile and minute of board meeting deciding to invest in Nepal.
• In case foreign investor is a firm, notarized copy of certificate of registration, documents evidencing the partners of the firm, firm profile and minute of partners meeting deciding to invest in Nepal,
• In case foreign investor is a foreign citizen of Nepalese origin or Nepalese citizen residing abroad, documents evidencing such status.
• In case foreign investor is an international organization, charter documents of such organization, documents showing introduction of its directors, profile of the organization and its decision to make investment in Nepal.
• Original Financial Credibility Certificate (FCC) of the Foreign Investor provided by a home country bank or domiciled country bank
• Where the foreign investor cannot be present for application, authority letter from the concerned companies or individuals to carry out any necessary work on their behalf and documents showing identification of the individual who is given such authority.
• Any additional documents required by the FDI approving authority.

At Company Registrar Office for company registration

• Online Application to obtain approval for Proposed Name of the company
• Application in prescribed format along with Approved Name of the company, Articles of Association and Memorandum of Association (two sets),
• Unanimous agreement between promoters, if any
• Promoters minute to register a company, if applicable
• FDI approval letter and JV if applicable from DOI
• Notarized copies of citizenships of local shareholders
• Notarized copy of passport of foreign party or Notarized Certificate of Incorporation, including Memorandum of Association and Articles of Association if the party is a company

At Local Authority for Business registration  

• Board minute for registration
• Form dully filled up
• Copies of company registration certificate
• Copies of Articles and Memorandum of Association
• Copy of rental agreement (office)
• Deposit of TDS of Rent amount
• Stamp of the company

At IRD for PAN registration  

• Board minute for registration
• Form dully filled up
• Copies of company registration certificate
• Copies of Articles and Memorandum of Association
• Copy of rental agreement (office) with TDS deposit slip
• Stamp of the company

At DOI for Industry Registration

• Dully filled up form as given in Annexure 1 of the Industrial Enterprises Rules 2078Copy of Citizenship certificate or Passport in case of foreigner
• In case applicant is a firm, copy of firm registration
• In case applicant is a company, Copies of Company registration, Articles and Memorandum of Association
• Details including map of the proposed address of the industry
• In case of industry to be established as a partnership firm, agreement between partners
• In case of industry to be established with foreign investment, approval letter for foreign investment
• Power of Attorney in case of nomination of authorized representative
• Recommendation from concerned local level where the industry will be established
• In case of industries covered by Schedule 1 of Industrial Enterprises Act 2076, approval from Industry and Investment Promotion Board
• Copy of Tax Registration certificate
• Project Report showing information as mentioned in Annexure 2 of the Industrial Enterprises Rules 2078

At concerned commercial bank for foreign currency deposit

• Application for deposit of foreign currency from Nepali company
• Copy of the decision of the Board of Directors or authorized officer of the Nepali company
• Copy of foreign investment approval from DOI
• Evidence that the Nepalese company is not blacklisted by Credit Information Bureau (CIB)
• Certified (Notarized) copy of registration certificate of the foreign investor (entity), or certified copy of passport of the foreign investor (individual)
• Certified copy of latest audit report (however, audit report will not be mandatory in case of investment of less than USD 1 million or its equivalent foreign currency. The audit report will not be mandatory if the financial statements prepared by the board of directors/ top management are accompanied by proof of non-requirement of the audit of financial statements is Submitted)
• Documents disclosing the identity of the ultimate beneficiary (not required in the case of a company listed in the securities market) of the foreign investor (entity)
• Certified copy of the documents showing source of investment (entity or individual) ,
• Certified copy of the decision of the Board of directors of the foreign investor entity or the authorized officer regarding foreign investment.
• In case, the natural person sending money is not an approved foreign investor, then certified copy of his/her passport, certified copy of the documents showing source of investment and certified copy of the documents showing relationship with the foreign investor
• A Copy of the written information given to the NRB for remittance of foreign currency into Nepal

Procedure for establishing industry with Projects of more than NPR 6 billion

1. Project Identification
2. Initial Consultation at Investment Board of Nepal (IBN)
3. Application for foreign investment approval at IBN including all required documents
4. Approval of foreign investment and issuance of approval letter by IBN
5. Incorporation of a Nepalese Company at Office of Company Registrar (OCR) by making application with required documents and paying required fee
6. Income Tax / VAT registration at Inland Revenue Office (IRO), Business Registration at Local Authority and Opening of Bank Accounts
7. Industry Registration at DOI
8. Written notification to Foreign Exchange Facilitation Unit of NRB located at single point service centre for bringing foreign currency into Nepal
9. Inflow of FDI into Nepal and deposit in concerned commercial bank after necessary verification by the bank
10. Application to NRB for recording/accounting of foreign currency brought into Nepal
11. Environmental assessment as required under related laws
12. Application for business license from the concerned regulating authorities if applicable
13. PDA / PIA negotiations
14. Commissioning of Industry

Note:

1. Prior approval for foreign investment or approval of NRB will not be mandatory for interested foreign investors to send / remit foreign currency into Nepal through banking system for feasibility study / pre-operating expenses. Such amount, up to 3% of their paid-up capital may be considered /accounted as foreign investment later if expenses certified by auditor and properly accounted in NRB.
2. Prior approval of NRB shall be required to bring foreign currency into Nepal for foreign investment where such foreign investment results in change of share ownership.

Documents required for establishing a new industry with projects of more than NPR 6 billion

Documents Required at IBN

• Preliminary Feasibility Report (must include following information)
  • Project Design
  • Estimated Cost of the Project
  • Proposed Financial Resources
  • Business/Operation Plan
  • Preliminary EIA Report
  • Proposed Revenue model
  • Proposed Royalty / Fee to Government
• Joint Venture Agreement (JVA), in case of more than one investor
• Citizenship certificate of local investor or Certificate of Incorporation, including Memorandum of Association and Articles of Association, Shareholders register, tax clearance certificate if the local investor is a company
• Notarized Copy of passport of foreign investor or Certificate of Incorporation, including Memorandum of Association and Articles of Association if the party is a company
• Bio-data / Company profile of the foreign party
• Financial Credibility Certificate (FCC) of the Foreign Investor provided by a home country bank or domiciled country bank
• Authority letter from the concerned companies or individuals to carry out any necessary work on their behalf, if applicable
• Other documents as demanded later based on the progress

Documents required at Company Registrar Office, Local Authority, IRD, DOI, and Bank,are more or less similar as explained above (in case of projects up to NPR 6billion).

Procedure for investing in Infrastructure Projects under PPP model

1. Short-listing of Projects by IBN / Nepal Government / Province Government / Local Government as appropriate
2. Invitation of Expression of Interest (EOI) from the interested investors by appropriate authority
3. Submission of EOI along with all required details and  documents to the appropriate authority
4. Short-listing of the possible candidates and invitation of technical and financial proposals
5. Selection of best proposal
6. Grant of license to carry out the detailed study of the project
7. Execution of PPP agreement

Note:

1. At present, Infrastructure projects of upto NPR 6 billion or hydro power project up to 200 MW is approved by the concerned ministry of Nepal Government.
2. Any entity desirous of implementing a project which it has identified, may submit their EOI directly to the appropriate authority without any public notice. The appropriate authority may either directly grant license for detailed study or invite competitive bidding if competitive bidding seems better option.

Starting a business in Nepal by investing in an existing industry

1. Industry identification and initial consultation at DOI / IBN
2. Application for foreign investment approval at DOI / IBN including all required documents
3. Approval of foreign investment and issuance of approval letter by DOI / IBN as the case may be based on the amount of the investment
4. Application to Nepal Rastra Bank for approval to bring FDI into Nepal
5. Inflow of  FDI into Nepal after NRB approval
6. Investment in the existing Nepalese company by share transfer or further issue of shares of Nepalese company
7. Certification of investor as new shareholder of the company from  Office of Company Registrar (OCR)
8. Industry Registration with DOI or change of the structure of industry at DOI
9. Application to NRB for recording / accounting of the foreign currency brought into Nepal

Note:

1. Prior approval for foreign investment or approval of NRB will not be mandatory for interested foreign investors to send / remit foreign currency into Nepal through banking system for feasibility study / pre-operating expenses. Such amount, upto 3% of their paid-up capital may be considered / recorded as foreign investment later if expenses certified by auditor and properly recorded in NRB.

Documents required for investing in an existing industry

At DOI / IBN

• Proposed Business Plan and Shareholding Structure,
• Request from the Investor,
• Request from the Seller,
• Share Purchase Agreement (2 copies),
• In case foreign investor is a natural person, his/her notarized copy of the Passport or other ID proving citizenship and personal bio-data,
• In case foreign investor is a company, notarized copy of Certificate of Incorporation, including Memorandum of Association and Articles of Association, Directors and shareholders register, company profile and minute of board meeting deciding to invest in Nepal,
• In case foreign investor is a firm, notarized copy of certificate of registration, documents evidencing the partners of the firm, firm profile and minute of partners meeting deciding to invest in Nepal,
• In case foreign investor is a foreign citizen of Nepalese origin or Nepalese citizen residing abroad, documents evidencing such status,
• In case foreign investor is an International organization, charter documents of such organization, documents showing introduction of its directors, profile of the organization and its decision to make investment in Nepal,
• Original Financial Credibility Certificate (FCC) of the Foreign Investor provided by a home country bank or domiciled country bank,
• Where the foreign investor cannot be present for application, authority letter from the concerned companies or individuals to carry out any necessary work on their behalf and documents showing identification of the individual who is given such authority,
• Any additional documents required by the FDI approving authority,
• Current Share Holders’ List of local company as certified by the Company Registrar’s Office,
• Current Directors’ List of local company as certified by the Company Registrar’s Office,
• Latest Auditor’s Report of the local company,
• Tax registration and Latest Tax clearance certificate of local company,
• Valuation Report of local company.

At NRB (for approval to bring foreign currency into Nepal)

1. Documents related to foreign invested company/industry:
   1. Application to bring foreign currency into Nepal for foreign investment,
   2. A copy of the decision of the Board of Directors or the authorized officer,
   3. A copy of approval of foreign investment,
   4. A copy of company/industry registration certificate,
   5. A copy of license of business operation (as per requirement),
   6. A copy of Memorandum and Articles of Association,
   7. A copy of certificate of Permanent Account Number,
   8. Evidence of non-blacklisting in Credit Information Bureau
   9. Certified copy of foreign investment agreement and approved share purchase/sale agreement (as per requirement),
   10. In case of sale of shares of Institutions not listed in the stock market, a copy of valuation of assets and liabilities (due diligence audit) from the auditor disclosing the price per share.
2. Documents relating to foreign investors:
   1. In case of institutional/corporate foreign investor:
      1. Certified Copy of registration certificate,
      2. Certified copy of latest audit report (however, audit report will not be mandatory in case of investment of less than USD 1 million or its equivalent in foreign currency. The audit report will not be mandatory if the financial statements prepared by the board of directors/ top management are accompanied by proof of non-requirement of the audit of financial statements is Submitted),
      3. Documents disclosing the identity of the ultimate beneficiary (not required in the case of a company listed in the securities board),
      4. Certified copy of the documents showing source of investment,
      5. Certified copy of the decision of the BOD or the authorized officer regarding foreign investment.
   2. In case of natural person foreign investor:
      1. Certified copy of his/her passport,
      2. Certified copy of the documents showing source of investment.
   3. If the natural person sending the money is not an approved foreign investor:
      1. Certified copy of his/her passport,
      2. Certified copy of the documents showing source of investment.
      3. Certified copy of documents showing his relationship with the foreign investor.

Note:

1. In case of foreign investment made by purchasing of shares through the stock market in accordance with the prevailing law in the company listed in the stock market, if the documents proving such transaction are submitted, then, in the case of such listed industry/ company, the documents mentioned in 2, 4, 5, 6, 7 and 8of (A) are not required.

Process Flow for Starting a business in Nepal

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Provision of Single Point Service Centre

As specified in Industrial Enterprises Act 2016, the Nepal Government has established a Single Point Service Center (Centre). All services required by an industry including concessions, facilities and incentives shall be provided through this Centre in an easy and spontaneous manner. In addition, other administrative services such as approval, registration, expansion and approvals for industries will be provided from the Centre on a timely manner.

Services provided by the Centre includes:

1. Services such as registration, establishment, approval, license renewal, transaction approval, capacity enhancement and classification of company, firm, industry which were earlier provided by Office of Company Registrar, DOI and Department of Commerce, Supply & Protection of Consumers.
2. Accepting document required for business registration in electronic form which can be used by various units internally.
3. Approval of foreign investment and repatriation thereof. Where departmental limit is above the center’s authority, take initiative to get the approval from appropriate authority.
4. Providing concessions on tax and duties and such other facilities, services and incentives as per prevailing laws.
5. Facilitating the process of getting approval to hold land beyond the approved ceiling for the purpose of establishment of an industry. The Center shall also facilitate to obtain government land on lease and other approval necessary for environment examination.
6. Facilitate infrastructure such as connection of electricity, communication, water, access road etc.
7. Providing work permits and visa related facilities to foreign investors and employees.
8. Issue Export and Import Code Number (EXIM code).
9. Facilitation in import and providing necessary approvals for all kinds of raw materials required in an industry.
10. Approval for Initial Environment Examination (IEE) and if delegated from the concerned ministry, approve, scoping documents and Terms of Reference (TOR).
11. Facilitate approval of Environment Impact Assessment (EIA).
12. Approval of foreign exchange up to US$ 100,000 at a time and facilitation for approval above USD 100,000 at a time.
13. Establish an investment portal to provide necessary information on investment.
14. Provide Permanent Account Number (PAN).
15. Provide export subsidy etc.

The FITTA 2019 has also introduced One-Stop Service Mechanism, which is to be established as per the prevailing law. Government of Nepal can provide exemptions, facilities, concession or services to foreign investors through One-Stop Service Mechanism.  Such services are registration of Industries, various approvals, labor permit, visa service, quality check and control of products produced by industries and others.

Recording/Accounting of Foreign Investment in NRB

The Nepalese Company / Industries with foreign investment or the foreign investor are required to submit application for the recording /accounting of the foreign investment in Nepal Rastra Bank (NRB)within 6 months of remittance of foreign currency into Nepal. If accounting is not done properly and regularly, then there may be problem at the time of repatriation while taking approval of NRB.

Following documents are required to be submitted to record/endorse the Foreign Investment in NRB

1. Documents related to Nepali companies/industries, bringing in foreign investment
   1. A copy of the decision of the Board of Directors or the authorized officer to record / account for the investment
   2. A copy of approval of foreign investment,
   3. A copy of company/industry registration certificate,
   4. A copy of license of business operation (as per requirement)
   5. A copy of certificate of permanent account number
   6. A copy of Memorandum and Articles of Association,
   7. A copy of the latest audit report,
   8. A copy of the latest tax clearance or proof of submission of tax return,
   9. A copy of the updated Shareholders and Directors register from the Office of Company Registrar (in the case of a company listed on the stock exchange, a share register certified by the share registrar licensed by the Securities Board.),
   10. A copy of the Letter from OCR regarding latest update (Adhyabadhik) of the company.
   11. Certificate issued by the concerned bank and financial institutions regarding the inflow of foreign currency into Nepal in relation to foreign investment and system generated evidence(SWIFT receipt),
   12. Certified (notarized) copy of foreign investment agreement and approved share purchase/sale agreement (as per requirement)

1. In Case of Foreign Investor being Institution
   1. Certified copy of the institution’s registration certificate,
   2. A certified copy of the latest audit report (however, the audit report will not be mandatory for investments of less than USD 1 Million or the equivalent foreign currency. Similarly, audit report will not be mandatory if the financial statements prepared by the board of director/top management are attached with the proof of non-audit of financial statements Submitted by foreign investors.)
   3. Document disclosing the identity of the ultimate beneficiary (not required in the case of a company listed on stock exchange)
   4. A certified copy of the decision of the Board of Directors or the authorized officer regarding foreign investment in Nepal

1. In case of foreign investor being a natural person:
   1. A certified copy of passport

Note:

1. In case of foreign investment made by the purchase of shares through the stock, market in accordance with the prevailing laws, in the company listed in the stock market, if the documents proving such transaction are submitted, in the case of such listed industry/ company, the documents mentioned in 3, 4, 5, 6, 7 and 8 of A are not required.
2. In case Foreign investment entered into Nepal before 8 June 2021 but not recorded/accounted in NRB till date, application for recording can be made within one year from that date (i.e. till 7 June 2022).

Registration Requirements for Foreign Companies before carrying out any business or transaction in Nepal

Foreign companies shall not carry on any business or transactions in Nepal without being registered under any of the following modalities:

• BRANCH

• LIAISON OFFICE

• LOCAL SUBSIDIARY

• JOINT VENTURES

Note

• A foreign company registered as liaison office shall not be entitled to do any income generating activity in Nepal. It is merely a contact office in Nepal.
• A foreign company can register a branch with rights to do income generating activities in Nepal.
• A foreign company can register a fully owned subsidiary company in Nepal. A private company is the most common corporate vehicle used by foreign companies seeking to establish a business presence in Nepal.
• A joint venture can take the form of a limited liability company among foreign and Nepali investors or among foreign investors only. International Joint Ventures between a foreign company and a local business are common in Nepal as well as individual level Joint Ventures between local and foreigner is also common phenomenon.

Provisions relating to Foreign Loan

Nepalese individuals, firms, companies, banks and financial institutions and other institutions can take loan from outside Nepal with prior approval of NRB. The provisions regarding acceptable borrower, acceptable foreign lenders, terms of foreign loan and interest cap are as given below:

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Other Conditions:

1. Prior approval of NRB will be mandatory for taking foreign loan.
2. Loans should be brought through banking channel.
3. After the loan amount is received, its recording should be done in NRB.
4. Lender should not be prohibited in any manner from conducting international financial transactions or providing foreign loans in Nepal.
5. The prevailing national and international legal provision related to the prevention of financial investment in money laundering and terrorist activities should be followed.
6. The loan amount is required to be utilized in the area as specified.
7. Interest and fees are required to be paid only after deducting tax as per the prevailing legal provisions. It is not mandatory for such amount to be within the same limit as provided in Condition 8.
8. If there is any expense/ charge/ commission/fee, etc. related to the loan, it should also be within the limit of interest rate. Also, if any expense, charge, commission, fee, etc. has to be paid for the purpose of approval of the loan, arrangements should be made to pay such amount within the prescribed limit of interest rate after the loan has been received. However, if loan is availed under S.N. 1 [(A) and (B) only for the lender], S.N. 6 and S.N. 7, the expenses, fees of Contingent nature whose provision are there in loan agreement and the payment to lender is required to be made then it is not necessary to abide by the following interest rate limit:
   1. Compensation Interest Fee: If the borrower fails to make payment of principal and/or interest, the interest on the overdue loan and/or the interest amount shall not exceed 2% per annum at the specified interest rate.
   2. Advance Payment Fee: Maximum lump sum up to 0.25% on the principal amount paid by the borrower prior to the stipulated timeline
   3. Commitment fee: Lump sum up to 0.25%
9. The loan amount brought in foreign currency where the foreign exchange risk is vested on the concerned lender can be accounted in NPR as well. The maximum interest rate of such loan amount can be up to the average base rate (as mentioned in the latest ‘Current economic and financial scenario of country’ published by Nepal Rastra Bank) of the commercial banks operating by obtaining license from Nepal Rastra Bank.
10. In regard to the foreign loan being availed at a fixed interest rate, the interest rate can be to the maximum extent mentioned in the table during the time of approval of application of foreign loan by Nepal Rastra Bank. However, the tenure of implementation of fixed interest rate can be to a maximum of 2 years in one time. Approval can be obtained from Nepal Rastra Bank for availing foreign loan without increasing the term of fixed interest rate for more than 2 years within the term of loan. If approval on fixed interest rate is not obtained from Nepal Rastra Bank, then the interest rate in accordance with the table will be implemented. This provision will come into effect only for the approval of foreign loan after the implementation of the amended byelaws.
11. In case of foreign loan to be availed according to conditions 1, 2, 3, 4, 5, and 8 of the Schedule 10 of the byelaws by the industries/ companies having foreign investment the proof of recording of foreign investment must be submitted and the application regarding foreign loan should be submitted to the Unit.
12. In transactions relating to foreign loan, no third party (including local party) can be included and no amount can be paid to the third party, apart from the lender and receiver of loan amount. If it is necessary to carry out consulting or any other activities on behalf of the lender, then arrangements shall be made in such a way that such charges are paid by the lender itself.
13. In order to avail foreign loan, no movable, immovable properties can be used for security, mortgage, guarantee and bank guarantee other than that prescribed by Nepal Rastra Bank.
14. The foreign loan cannot be used in the areas of real estate like housing, land development and securities market.
15. Other conditions shall be as prescribed by the NRB from time to time.

*Benchmark Interest Rates:

1. Secured Overnight Financing Rate (SOFR) for new loan denominated in USD, Sterling Overnight Interbank Average Rate (SONIA) for new loan denominated in GBP, Swiss Average Rate Overnight (SARON) denominated for new loan denominated in CHF, Tokyo Overnight Average Rate (TONA) for new loan denomination in JPY, and Euro Short-term Rate (€STER) for new loan denomination in EUR.
2. If the previous loan agreement has the Fallback Provisions instead of LIBOR after 31December 2021, such provision shall apply. However, if SOFR, SONIA, SARON, TONA or €STER are mentioned in the Fallback Provisions then with the consent of both lender and borrower a maximum All-in-cost 50 basis points margin may be added on the basis of the former LIBOR.
3. If the previous loan agreement does not have Fallback Provisions instead of LIBOR after 31 December 2021, it is denominated in USD under LIBOR Benchmark interest rate as Overnight, 1 month, 3 months, 6 months or 12 months until 30 June 2023 (in case such LIBOR Benchmark is published) it will be as per the previous loan agreement. Also, such foreign loans will be subject to LIBOR (in the case such LIBOR Benchmarks is published) as calculated by Synthetic Methodology till 31 December 2022, if the LIBOR Benchmark interest rate is 1 month, 3 months or 6 months duration for GBP and JPY under Tough Legacy Contracts.
4. In the case of previous loan agreements not covered under clauses (b) and (c), SOFR (for loans denominated in USD), SONIA (for loans denominated in GBP), SARON (for loans denominated in CHF), TONA (for loans denominated in JPY) and €STER (for loans denominated in EUR) Benchmark Interest Rate shall be applicable instead of LIBOR after 31st December 2021. And, the maximum All-in-cost 50 basis agreed upon by both the lender and the borrower on the approved margin based on LIBOR shall be added.

Documents to be submitted along with the application for the approval of foreign loan

A.    Copy of loan agreement between lender and borrower
B.    Documents relating to lender:

If lender is an institution:

1) Certified copy of registration certificate,
2) Document disclosing the final/ultimate beneficiaries,
3) Certified Copy of Decision of the Board of Directors or Authorized Officer regarding disbursement of loan
4) Certified copy of latest audit report. (However, audit report will not be mandatory in case of loan of less than USD 1 million or its equivalent in foreign currency. Similarly, the audit report will not be mandatory if the financial statements prepared by the board of director / top management are attached with the proof of no requirement of the audit of financial statements is Submitted by the foreign lender,
5)Certified copy of the documents relating to the source of foreign loan.

If lender is a natural person:

1) Certified copy of his/her passport,
2) Certified copy of the documents relating to the source of foreign loan.

The documents mentioned in clause (B) above are not required if the lender is a foreign bank and financial institution, financial institution situated abroad approved to disburse loan by the related country’s government or central bank or other regulatory body, finance company, pension fund, hedge fund and other listed institution in the securities market. However, documents proving the identity of the lender shall be submitted.

C.   Documents relating to borrower:

If borrower is an institution:

1) Copy of registration certificate,
2) Copy of the license for the commencement of business (as required),
3) Copy of Permanent Account Number (PAN),
4) Copy of MOA and AOA,
5) Copy of decision of Board of Directors to take loan,
6) Copy of approval/recommendation letter of the concerned body (if available),
7) Copy of latest audit report,
8) Copy of latest tax clearance certificate or proof of payment of tax,
9) Proof that it is not blacklisted by the Credit Information Bureau (CIB).

If borrower is a natural person:

1) Copy of citizenship certificate,
2) Proof that it is not blacklisted by the Credit Information Bureau (CIB),
3) Letter of commitment to receive the approved loan from banking system,
4) Documents confirming the need to take loan from abroad and loan utilization plan,
5) Documents disclosing the basis for repayment of loan considering exchange risk also,
6) Time Schedule of loan disbursement and loan repayment,
7) Self-declaration from the applicant regarding no misappropriation of foreign currency, compliance with prevailing national and international legal provisions relating to prevention of financial investment in money laundering and terrorist activities and compliance with prevailing legal provisions.
8)  Other documents as prescribed by NRB.

Documents to be Submitted for accounting of foreign loans

1.    A copy of foreign loan approval letter provided by NRB,
2.    A copy of evidence issued by banks and financial institutions in connection with the inflow of foreign currency into Nepal and System Generated Evidence,
3.    A copy of the latest audit report,
4.    A copy of latest tax clearance or proof of Submission of tax return,
5.    A copy of the decision of the Board of Directors or the authorized officer in respect of accounting/recording of foreign borrowing,
6.    A certified copy of loan agreement,
7.    A certified copy of Loan Repayment Schedule,
8.    Recommendation of the Ministry of Industry, Commerce and Supplies, Government of Nepal or letter of acceptance from the concerned body (if available)

(If the borrower is a natural person, documents mentioned in point no. 3, 4, and 5 are not required.)

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