Section 66: Foreign Exchange Reserve

1) The Bank shall mobilise the foreign exchange reserves. Such reserve shall be denominated in the respective foreign exchange, and such reserve shall consist of the following assets:

(a) Gold and other precious metals held by or for the account of the Bank,

(b) Foreign currencies held by or for the account of the Bank,

(c) Foreign currencies held in the accounts of the Bank on the books of a foreign central bank or other foreign banks,

(d) Special drawing rights (SDR) held by the Bank at the International Monetary Fund,

(e) Bill of exchange, promissory note, certificate of deposit, bonds, and other debt instruments payable in convertible foreign currencies issued by any debtor or liability holder and held by the Bank,

(f) Any forward purchase or repurchase agreements of the Bank concluded with or guaranteed by foreign central banks or public international financial institutions, and any futures and option contracts of the Bank providing for payment in freely convertible foreign currency.

2) While selecting the assets referred to in sub-section (1), due consideration should be given to the Bank’s capital and liquidity to maximise earnings.

3) The Bank shall maintain an international reserve at a level which shall be adequate for the execution of monetary and exchange rate policies and for the prompt settlement of global transactions.

4) If international reserves have declined or, in the opinion of Bank, are in danger of declining to such an extent as to jeopardise the execution of the monetary or exchange rate policies in the prompt settlement of the country’s international transactions, the Bank shall submit to Government of Nepal a report on the international reserves position and the causes which have led or may lead to such a decline, together with such recommendations as it considers necessary to remedy the situation.

5) Until such time as the situation referred to in sub-section (4) has been rectified, the Bank shall make further such report and recommendations to the Government of Nepal.

6) The Bank shall hold the foreign exchange reserve referred to in sub-section (1) on its balance sheet.