11 June 2021

The regulatory banker, Nepal Rastra Bank (NRB), has promulgated a new foreign investment bylaw. This bylaw deals with approval procedures related with foreign investment. It eases requirements for certain equity investments and certain loan investments.

Under the new bylaw, pre-operating investments employed in business feasibility and research study for an FDI business capped to 3% of the total equity investment will be allowed as foreign investment and will not require the regulator’s pre-approval or an NRB approval. Any foreign investment approved by the Department of Industries (the industry regulator) will not require an NRB approval for the remittance of the regulator’s approved investments into the company. NRB will provide the recordation of such foreign investments. Similar provisions have been made for foreign loan through securities.

The new bylaws lays down provisions related to foreign loan. Accordingly, a foreign loan can be obtained from a foreign person, firm, a company, an institution or an NRN. It is to be cautiously noted that under the FDI act (2075 BS), an FDI company may borrow a foreign loan from a foreign financial institution only, subject to Ministry of Industry recommendation and approval of the NRB.