Nepal Rastra Bank (NRB) has issued Foreign Direct Investment and Loan Management By-law, 2077 (2021 AD) as a Consultation Document to the general public vide notice dated 9 February 2021. The draft document includes, among others, the provisions relating to approval of Foreign Loan and endorsement of such loan at NRB. The following is the summary of the consultation document relating to Foreign Loan.
Except as permitted by prevailing law, Nepali individuals, firms, companies, banks and financial institutions and other organized bodies willing to take loan from outside Nepal in Indian Rupees or in foreign currency, prior approval of NRB is required. An application along with required documents has to be submitted to Foreign Exchange Management Department at NRB and NRB has to provide its decision within 15 days from the date of receipt of application. The concerned Bank and Financial Institution has to issue the certificate of Foreign loan in the prescribed format on receipt of the same in foreign currency.
The borrower of Foreign Loan has to get the Foreign Loan recorded and endorsed within six months of receipt of such Foreign Loan. NRB will not be obliged to sanction foreign exchange facility for payment of principal, interest and other fees on such foreign loan which is not accounted for and endorsed by NRB.
Reanda Biz Serve Comments
The proposed provision in the draft document issued by NRB has tried to consolidate all the provisions with respect to borrowing of funds by Foreign Investors along with the requirements of approval and endorsement. Now, it has also proposed to resolve the ambiguity with respect to borrowing of funds from the foreign company/organization, parent company/group companies, Non-Resident Nepalis etc. by foreign investor in Nepal which was somehow limited to borrow the funds under project financing/project loan from banks and financial institutions only by the provisions of Foreign Investment and Technology Transfer Act (FITTA), 2075 (2019 AD). This is a welcoming step taken by NRB.
A detailed chart of proposed provisions with respect to borrowing of Foreign Loan by Foreign Investor along with terms and conditions proposed can be downloaded here.
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