Establishment, Objectives and Functions, Duties and Powers Of Nepal Rastra Bank

Chapter - 2 Establishment, Objectives and Functions, Duties and Powers :-

3. Establishment of the Bank: 

• There shall be a Central Bank established in the name as NEPAL RASTRA BANK in order to carry out the functions of Central Bank. 
• The Nepal Rastra Bank established under the Nepal Rastra Bank Act, 2012 (1955) shall be deemed to have been established under this Act.
• The Bank shall be an autonomous and corporate body with perpetual succession.
• There shall be a separate seal for transaction of business of the Bank.
• The Bank may, subject to this Act, acquire, utilize, retain, sell and otherwise dispose of or manage movable and immovable property
• The Bank may sue in its name and the Bank may also be sued in the same name.
• The Central office of the Bank shall be located at Kathmandu and the Bank may open branch, sub-branch and other offices at any place within and outside Nepal and appoint agent or representative as per its requirement.  

4. Objectives of the Bank:

1. The objectives of the Bank shall be as follows:-  

• To formulate necessary monetary and foreign exchange policies in order to maintain the stability of price and balance of payment for sustainable development of economy, and manage it;
• To promote stability and liquidity required in banking and financial sector;
• To develop a secure, healthy and efficient system of payment;
• To regulate, inspect, supervise and monitor the banking and financial system; and 
• To promote entire banking and financial system of the Nepal and to enhance its public credibility.

2.  The Bank shall, without any prejudice to the objectives referred to in Sub-section (1), extend co-operation in the implementation of the economic policies of Government of Nepal.

5. Functions, Duties and Powers of the Bank: 

(1) In order to achieve the objectives referred to in Section 4, the functions, duties and powers of the Bank shall be as follows: 

• To issue bank notes and coins; 
• To formulate necessary monetary policies in order to maintain price stability and to implement or cause to implement them;
• To formulate foreign exchange policies and to implement or cause to implement them;
• To determine the system of foreign exchange rate;
• To manage and operate foreign exchange reserve; 
• To issue license to commercial banks and financial institutions to carry on banking and financial business and to regulate, inspect, supervise and monitor such transactions;
• To act as a banker, advisor and financial agent of Government of Nepal;
• To act as the banker of commercial banks and financial institutions and to function as the lender of the last resort; 
• To establish and promote the system of payment, clearing and settlement and to regulate these activities; and
• To implement or cause to implement any other necessary functions which the Bank has to carry out in order to achieve the objectives of the Bank under this Act;  

2. While exercising the powers conferred by this Act or any other prevailing law, the Bank shall have power to carry out other functions and take actions, which are incidental thereto. 

(3) No one shall violate powers conferred on the Bank under this Act.

7. Functions not to be Carried out by the Bank: 

(1) Except otherwise provided for in this Act, the Bank shall not carry out the following functions:- 

• Providing any loan, accepting any type of deposit or making any type of financial gift;
• Purchasing shares of any commercial bank, financial institution, public corporation or a company or acquiring any type of proprietary right in any financial, commercial, agricultural, industrial or other institution;
• Carrying out any type trade; and 
• Acquiring right over movable and immovable property by way of purchase, lease or in any manner whatsoever. Provided that the Bank may acquire such property as required for carrying out its function or for achieving its objectives.

(2) Notwithstanding anything contained in Sub-section (1), the Bank may carry out the following functions: -

•  To provide loan to and invest in the shares of the institutions which carry out the functions helpful in carrying out the function of the Bank or in attaining its objectives, not exceeding ten percent of the total capital of such institutions. Explanation: For the purpose of this Clause, "institutions which carry out the functions which are helpful in carrying out the functions of the Bank or in attaining its objectives" means any institutions, companies which are exclusively engaged in evaluating, managing, protecting the security, restructuring and transferring the securities of commercial banks or of financial institutions, carry out the function of credit rating, exchange of credit information, process and transmit data, print financial instruments, clearing payments, liquidate property, produce bank notes and coins and act as trustee and any other institution or companies established for carrying out similar function and prescribed by the Bank.
• To provide loan to its own employees.  

8. Privileges and Facilities to the Bank: 

Notwithstanding anything contained in the prevailing laws, the Bank shall be entitled to the following privileges and facilities: 

• Exemption from all types of taxes, fees and charges on the incomes, capital transactions, houses, land, assets etc. 
• No requirement for the payment of registration fee for registration of the deeds of loan or refinance to be given by the Bank;
• No requirement of revenue stamps on any of the documents relating to the Bank;
• There would be no tax, fee, charge, duty on the export and import of bank notes, coins, gold, silver and the paper, metal, chemicals, and other materials to be used for printing bank notes and minting coins. 

11. International Cooperation and Relationship: 

• The Bank shall represent Nepal in international organizations and associations on the matters within the jurisdiction of working areas of the Bank such as monetary policy, foreign exchange policy, and the balance of payment, bank supervision and other related matters.
• The Bank may provide the services of banking and payment to foreign government, foreign central banks, foreign bank and international organizations, or associations, and obtain similar type of facilities from them. 
• The Bank shall take part in international organizations or associations working for the financial and economic stability through international monetary cooperation. 
• The Bank, while taking part in international organizations or association as a representative of Nepal, shall assume the responsibility and undertake the functions to be carried out on behalf of the country.