February 18: At a time when the government is gearing up for the Third Investment Summit, Nepal Rastra Bank has also turned flexible in the provision related to foreign investment. The central bank has amended the 'Foreign Investment and Credit Management Regulations 2078' relaxing the provision requiring NRB’s prior approval for foreign investment.

As per the revised regulations, investors do not require the approval of the central bank to inject foreign investment by changing the share ownership. However, there is a provision that even if the share ownership of foreign investment changes, the ownership ratio of Nepali shareholders should not decrease.

Likewise, the amended law has a provision that does not require the approval of the central bank to bring in foreign investment in companies listed in the stock market and for sick industries as per the Industrial Enterprises Act, 2076.

Until now, the approval of the central bank was mandatory for financing foreign investment. Now, the investors only need to inform the central bank about the foreign investment.

As per the revised rules, the foreign investment financing industries and foreign loan borrowers must submit details as requested by the central bank.

Similarly, the NRB has also facilitated the provision of bank guarantee for foreign currency. By issuing instructions to banks and financial institutions, it has made arrangements so that that foreign bank guarantees can be directly issued for non-loan purposes such as bid bonds and performance bonds.

Similarly, foreign pension funds, hedge funds, government/inter-government owned development finance institutions, etc. can also accept financial guarantees issued by lending institutions without the approval of the central bank. However, a maximum commission fee of 1.5 percent has been set for bank guarantees taken from foreign banks and financial institutions.