Nepal Rastra Bank (NRB) has announced a regulatory change that exempts foreign investments in listed companies from requiring the central bank’s approval. This development comes as part of the third amendment to the NRB Foreign Investment and Foreign Loan Management Bylaws 2021 facilitating easier participation of foreign investors in Nepal’s stock market.
Under the amended regulations, foreign investors are not required to seek NRB’s approval for investing in shares of companies listed on the stock exchange or for changes in share ownership post-investment. However, foreign investors must submit written information in the format specified in Schedule-2 of the regulations prior to importing or sending foreign currency into Nepal, following approval from the authority concerned.
The amendment also stipulates that in cases where foreign investment is not introduced within a specified timeframe, the foreign investment approval body must be approached for an extension. Banks and financial institutions will then deposit the foreign investment amount into the account of the concerned company or industry in Nepal.
The requirement for NRB’s approval has been waived not only for investments in listed companies but also for foreign investments in sick industries as defined under the Industrial Enterprises Act 2020. Furthermore, foreign investments that do not diminish the shareholding ratio of Nepali shareholders in Nepali industries also do not require NRB’s approval.
The revised regulations clarify that it is not mandatory to repatriate amounts exceeding the approved foreign investment, provided that such excess can be accounted for as foreign investment upon receiving approval from the foreign investment approval body. This flexibility allows for more than the approved amount of foreign investment to be brought into the country, with the condition that subsequent approval covers the excess amount, and all related accounting provisions are adhered to.
Additionally, industries with foreign investments and borrowers of foreign loans are required to submit detailed information as requested by the NRB. The regulation eases the documentation process for reinvesting profits earned from foreign investments, eliminating the need for a certified copy of the document revealing the identity of the real owner in certain cases.
This amendment by the NRB is aimed at making Nepal more attractive to foreign investors and simplifying the process of foreign investment in the country’s burgeoning stock market and industries.
