Chapter-6 Provisions Relating to Capital, Capital Fund and Liquid Assets

Chapter-6 Provisions Relating to Capital, Capital Fund and Liquid Assets

41. Capital to be Maintained :(1) The minimum paid up capital of a bank or financial institutions shall be as prescribed by the Rastra Bank from time to time.
(2) Banks or financial institutions shall fulfill the minimum paid up capital as set forth in Sub-Section (1) within the time frame as set by the Rastra Bank.
(3) The Rastra Bank may make provisions that requiring a person, firm, company or institution may only invest up to a maximum of fifteen percent of the paid up capital of any one bank or financial institution.
(4) While investing in other bank or financial institution by any person, firm, company or institution having investment in one bank or financial institution pursuant to Sub-Section (3), investment shall be made in such manners so that it shall be less than one percent of the paid up capital of the said bank or financial institution only.
(5) Provisions concerning investment by any person, firm, company or institution in the paid up capital of any bank or financial institution to be established in
foreign joint venture, a “D” class financial institution and infrastructure development bank shall be as prescribed by the Rastra Bank.
(6) The percentage of the share capital that may be invested by any person or institution in order to incorporate a bank or financial institution or invest in a bank or financial institution shall be as prescribed by the Rastra Bank from time to time.
42. Capital Fund: (1) A bank or financial institution shall have to maintain the capital fund in the ratio as prescribed by the Rastra Bank on the basis of its total assets or total risk-weighted assets. The Rastra Bank may, while prescribing such ratio, also prescribe the ratio of additional capital fund.
(2) In cases where a bank or financial institution fails to maintain the capital fund set forth in Sub-Section (1), the Board of Directors of such bank or financial institution shall furnish information thereof to the Rastra Bank within one month.
(3) The information set forth in Sub-Section (2) shall also be accompanied by, inter alia, the reasons for the failure to maintain the capital fund and the plans or programs prepared by the Board of Directors to increase the capital fund and restore it to the position as prescribed by the Nepal Rastra Bank.
(4) On receipt of the information as pursuant to Sub-Sections (2) and (3) , if the Rastra Bank deems the plan or program submitted by the Board of Directors reasonable, it may give directive to the concerned bank or financial institution to implement such plans or programs; and if any amendment or alteration is to be made in the proposed plans or programs it may give instructions to the concerned bank or financial institution to amend or alter such plan or programs stating the reasons for such amendment or alteration, and to implement the same.
43. Provisions Concerning Possible Loss: A bank or financial institution shall make provisions of loss as prescribed by the Rastra Bank so as to be able to cover its potential risks concerning assets including loans and liabilities incurring from the off balance sheet transactions.
44. General Reserve Fund: (1) A bank or financial institution shall maintain a general reserve fund. At least twenty percent of the net profits of each fiscal year shall be added until the paid up capital is doubled and at least ten percent shall be deposited in every fiscal year thereafter in such a reserve fund.
(2) The amount credited to the general reserve fund of a bank or financial institution pursuant to Sub-Section (1) may not be invested or transferred to any other headings or spent without obtaining prior approval of the Rastra Bank.
45. Exchange Equalization Fund: (1) A bank or financial institution carrying out foreign exchange business shall make necessary accounts adjustments in the profit and loss account of the revaluation profits earned as a result of fluctuations in the exchange rates of foreign currencies, other than the Indian currency, every year at the end of the same fiscal year. While making such accounts adjustment in the profit and loss account, if revaluation earning has been made in any fiscal year, at least twenty-five per cent of such profits shall be credited to the exchange equalization fund:
Provided that in the case of a revaluation profit-loss resulting from fluctuation in the exchange rate of the Indian currency, it shall be as prescribed by the Rastra Bank.
(2) No amount credited to the exchange equalization fund pursuant to Sub-Section (1) shall, without the approval of the Rastra Bank, be spent or transferred to other headings for any purpose other than the adjustment of loss resulting from the devaluation of foreign currencies.
46. Liquid Assets to be Maintained: A bank or financial institution shall maintain liquid assets as may be prescribed by the Rastra Bank from time to time.
47. Declaration and Distribution of Dividends: (1) A bank or financial institution shall obtain approval of the Rastra Bank before declaring and distributing dividends.
(2) No bank or financial institution shall be allowed to declare or distribute dividends to its shareholders until it recovers all of its preliminary expenses and the losses sustained by it until the previous year, capital as prescribed by the Rastra, capital fund, possible loss provisioning bank and for general reserve fund pursuant to Section 44 and until complete sale of shares to be allotted to the general public.
48. Power to Issue Order to Decrease Capital: Notwithstanding anything contained in the prevailing laws, the Rastra Bank may issue an order to decrease the issued and paid up capital of a bank or financial institution.