Section 5: Prior approval to be obtained for Incorporation of Bank or Financial Institution on Foreign Investment

1) Any foreign bank or financial institution shall, prior to incorporation of a bank or financial institution as a subsidiary company under this Act in a joint venture with a body corporate registered in Nepal or a Nepali citizen or to maintain the share capital as specified by the Rastra Bank, have to submit the following documents and details as well along with the fee specified by the Rastra Bank while applying pursuant to sub-section (1) of Section 4:-

(a) The Memorandum of Association, Articles of Association of foreign bank or financial institution and a copy of the certificate of incorporation of the bank or financial institution in the concerned country and capital structure thereof,

(b) Copy of the license of the foreign bank or financial institution obtained from the concerned country for carrying on banking and financial transactions,

(c) Details as to the principal place of business,

(d) Certified copy of the audited balance sheet and profit and loss account of the last three years of the foreign bank or financial institution,

(e) Details as to the proposed business plan in Nepal, business strategies and types of transaction to be carried out internal control, and risk management,

(f) Decision made by the foreign bank or financial institution as per the prevailing laws of the concerned country to open a bank or financial institution in Nepal and authority granted by the regulatory body of the concerned country.

2) Rastra Bank may, if it finds appropriate to grant approval upon examination of the application submitted for prior approval pursuant to sub-section (1) and enclosed documents, grant its approval to a foreign bank or financial institution for incorporation of bank or financial institution in a joint venture or within the prescribed share limit within one hundred twenty days after the filing of the application, with or without prescribing any conditions.

3) A foreign bank or financial institution may, with approval from the Rastra Bank, take share ownership of a local bank or financial institution having been in operation as a joint venture by completing the procedures as prescribed by the Rastra Bank.

4) Notwithstanding anything contained elsewhere in this Act, the investment made by any foreign bank or financial institution or other foreign institution by getting approval pursuant to prevailing laws before the commencement of this Act shall be deemed to have been continued.