Section 75: Credit to the Government of Nepal and Purchase of Government Debt Bonds

1) Except otherwise provided in this Act, the Bank shall not provide any financial assistance to the Government of Nepal or an institution under the full, substantial or partial ownership of the Government of Nepal.

2) Subject to the limits specified in this Section, the Bank may extend credit to the Government of Nepal with a condition to repay within one hundred eighty days.

3) Notwithstanding anything contained in sub-section (2), the Bank may extend a special long-term credit to the Government of Nepal only on account of subscription and similar payments resulting from or incidental to the membership of Nepal with an international organisation.

4) The Bank shall disburse credit to be extended to the Government of Nepal or an institution under full or substantial or partial ownership of the Government of Nepal only in Nepalese rupees. Such credit shall be certified by a negotiable debt bond issued by the Government of Nepal and delivered to the Bank. Such debt security should have a maturity corresponding to the maturity of the extended credit and should bear interest at the market rate. There must be a written agreement executed between the Government of Nepal and the Bank. Such an agreement should stipulate the principal amount of the loan or the limit on a line of credit, the maturity date, and the applicable interest rates and other charges.

Explanation: For the purpose of this Section, “Negotiable Debt Bond” means the debt bond issued in the form of a promissory note.

5) At no time shall the amount of overdraft provided by the Bank to the Government of Nepal be more than five per cent of the revenue income of the Government of Nepal in the preceding fiscal year. While computing such revenue income, the amount of borrowing, grants or any other form of financial assistance or income received from the sale of property shall not be included.

6) Government of Nepal shall make the payment of the overdraft referred to in sub-section (5) within one hundred eighty days at the prevailing interest rate, either in the form of cash or marketable debt bond.

7) The total amount of debt bonds purchased by the Bank from the Government of Nepal and taken into its ownership shall not be more than ten per cent of the revenue income of the preceding fiscal year.

8) In the following circumstances, the debt bond issued by the Government of Nepal and purchased by the Bank shall not be treated as the credit extended under sub-section (7):

(a) If the purchase is made in the secondary market for the operation of the open market consistent with the monetary policy of the Bank,

(b) If the purchase is made in the primary market, when it is necessary in the opinion of the Bank, to maintain stability in the market at the time of primary issue of such securities and such securities are divested within 60 days of purchase,

(c) The debt bond purchased by the Bank from the Government of Nepal and retained in its ownership prior to the commencement of sub-section (7).