part 6

106 Chapter-14 Miscellaneous 107. Special Provisions on Infrastructure Development Bank: (1) The Rastra Bank may formulate separate special policy provisions or issue directives concerning the establishment, operation, regulation, supervision actions, merger and acquisitions or liquidation of Infrastructure Development Banks based on the nature, volume and investment made in respective Infrastructure Development Banks. (2) Notwithstanding anything contained elsewhere in this Act, the maximum limit of shares to be subscribed by a promoter or shareholder of an Infrastructure Development Bank or limit of equity investment to be made by any foreign bank, financial institution and other corporate body in shares, debentures or other financial instruments shall be as determined by the Rastra Bank from time to time. 108. Security of Deposits to be made: A licensed bank or financial institution shall have to make security of the amount remained in deposit account as prescribed by the Rastra Bank in accordance with the provision as prescribed by the prevailing law. 109. Banking Secrecy to be Maintained: (1) The relationship between a bank or financial institution and its customers and information pertaining to its accounts, records, books, ledgers and statements shall not be disclosed to any person other than the concerned person. (2) Notwithstanding anything contained in Sub-Section (1), the secrecy shall not be deemed to have been violated, if the details or information of any person remained in bank or financial institution is provided in following manner: - (a) If the details or information is provided to the Rastra Bank pursuant to this Act or Rastra Bank Act or the Rules or Byelaws framed thereunder or the orders or directives issued thereunder or if the details or information is shared between banks or.

107 financial institutions in the course of exchanging credit information, (b) If the details or information is provided to the court in connection with any litigation or any other legal action, (c) If such notice or information is provided to the legally authorized official inquiries and investigations or prosecution, in connection with such inquiries and investigations or prosecution; or if it is provided to the enquiry committee or the investigation officer authorized by the other prevailing laws, in the course of enquiries or if such information is provided to the regulatory bodies, (d) If any details or information is provided to the auditor in the course of auditing, (e) If any details or information is provided to foreign country in accordance with prevailing laws relating to mutual legal assistance, (f) If, in the course of investigation of any case of specific nature, the Government of Nepal, Ministry of Finance, has made a request, accompanied by the reason therefor, for providing the details of the account of the bank or financial institution or any details of the account of any person, firm, company or institution maintained with the bank or financial institution, and if the Rastra Bank has given direction for the same. (3) No one shall divulge any information or details received under Sub - Section (2) to any unauthorized person. (4) Except in the situation as mentioned in Sub-Section (2), the Directors, Chief Executive, employees, auditor, advisors of a bank or financial institution or any other relevant person shall not divulge the secrecy of the accounts, records, books, ledgers and any other information of the bank or financial institution the.

108 secrecy of which is required to be maintained in such a manner as to undermine the relationship between the bank or financial institution and its customers. 110. Power to give Directive to freeze Accounts: (1) The Rastra Bank may, in following circumstances, give directive to a bank or financial institution at any time to freeze any account not allowing any type of payment or transfer of fund in the name of any person, firm, company or institution:- (a) In case of request made by an authorized officer to the Rastra Bank in the course of investigation of any offence, (b) In order to uphold national interests by preventing money laundering and terrorists financing and controlling of an offence of corruption, organized crime or possible offence may be incurred in the transaction of bank and financial institution. (2) It shall be the duty of the concerned bank or financial institution to comply with the directive given by the Rastra Bank pursuant to Sub-Section (1). 111. Right to Claims over the Deposits: (1) Claims of any person other than the actual depositor to deposits made with a licensed institution shall not be entertained. (2) In the event of the death of the depositor, the nominee appointed by him/ her, if any, and if such nominee also dies or if no nominee has been appointed by the depositor, the surviving person from amongst his/her relatives, in the following order, shall have first right to such deposits: - (a) Husband or wife living in the joint family, (b) Son or daughter, or adopted son or adopted daughter or widow daughter-in-law, living in the joint family, (c) Father, mother, grandson or granddaughter living in the joint family,.

109 (d) Husband or wife, son, daughter, father or mother, son, daughter- in-law or married daughter living separately, (e) Grandfather, grandmother, brother, nephew, niece, sister living in the same family, grandfather or grandmother living separately, (f) Step mother living in the joint family, grandson and unmarried granddaughter towards son living separately, (g) Elder or younger brother living separately, nephew, niece, sister, nephew, niece (h) Uncle, widowed aunt, sister-in-law (elder or younger brother's wife), or grand-daughter-in-law living in a joint family, (i) Married sisters, grand-daughter-in-law living separately. (3) If there is no one in the order of priority as referred to in Sub- Section (2), the successor shall have the title to such deposit, and if there is not even such successor, the deposit shall be collected to the Banking Development Fund of the Rastra Bank and be used for banking development. (4) Notwithstanding anything contained in prevailing laws, no amount deposited with a bank or financial institution shall be handed over to anyone without the approval of the person who has the title thereto under Sub- Section (1). 112. Statement of Unclaimed Deposits: (1) A bank or financial institution shall, within the first month of each fiscal year, submit to the Rastra Bank statement of deposit accounts which have remained unreported, and of those the title to which have not been claimed under this Act for ten years..

110 (2) A bank or financial institution shall publish a notice to collect the unused or unclaimed deposits as referred to in Sub-Section (1) once in every five years in a national level daily newspaper. Details description of that shall also have to be kept by the bank or financial institution in its website. (3) In case the amount as referred to in Sub-Section (1) is not collected for a period of twenty years, such deposit shall be collected to the Banking Development Fund of the Rastra Bank and be used for banking development. 113. Recovery from or confiscation of deposits: If any business or transaction is carried on by pledging as collateral or security the amount deposited with a bank or financial institution, or if amounts are deposited with a bank or financial institution with misappropriated funds belonging to the governmental body or anybody owned by the Government of Nepal, or with funds obtained by committing any act which is deemed to be an offense under the prevailing laws, or with funds collected through any activity relating to terrorism or organized crime or banking or financial offence or organized crime, such deposits may be confiscated or such collateral or security or misappropriated or other funds may be recovered from such deposits or such deposit may be confiscated in accordance with the prevailing laws. 114. Recovery from Director: In case any Director is found to have taken any cash or kind for personal benefit in the course of transaction of a bank or financial institution, the bank or financial institution shall have to recover such cash or kind from such Director. 115. Claims may not be made: In case any person is found to have entered into any transaction with any Director or his/her representative knowingly or having adequate reasons to believe that the Director entered into the transaction for his/her personal interests or causing loss to the bank or financial institution, such a person may not make a claim against the bank or financial institution with regard to such transaction..

111 116. Government of Nepal to be plaintiff:(1) The case relating to offenses as referred to in Section 103 shall be filed with the Government of Nepal being the plaintiff, and such case shall be deemed to have been included in Schedule 1 of the Government Cases Act enforce. (2) Anyone may file a complaint in writing or verbally against any Director, official, employee, borrower or any other person committing an offence referred to in Section 103 along with evidence thereof at the nearby police office. While filing such a complaint, it shall not be required to mention the name. (3) The Rastra Bank shall have to extend necessary cooperation in all acts of investigation, prosecution and adjudication of the offences as referred to in Section 103. 117. Provisions on Transparency: (1) A bank or financial institution or a branch of a foreign bank or financial institution shall have to publish a periodic report on its financial position and status of risks in every three months for transparency of the transactions it has carried out. (2) The minimum matters to be included in the report as referred to in Sub- Section (1) shall be as prescribed by the Rastra Bank. 118. Provisions on Protection of Customers’ Interests: The Rastra Bank may carry out the following functions for the purpose of protection of interests of consumers:- (a) To make assurance that the licensed bank or financial institution has been carrying out its financial transactions as per the prevailing laws and that they have been making available financial services to the consumers in transparent and fair manner, (b) To make coordination on matters of protection of interests of customers in the financial sector,.

112 (c) To collect necessary information to reform in the sector of protection of interests of consumers in the banking sector and to bring financial literacy. 119. Exemption and facilities: (1) Any mortgage deed of movable or immovable assets to be made for credit not exceeding one million rupees supplied by a bank or financial institution to any citizen of Nepal or any institution established in accordance with the laws in force for agriculture, cottage and small-scale industry, irrigation, hydro- power generation and for any other enterprise as specified by the Government of Nepal shall not be required to make registration. (2) The repayment period of the credit and deposits shall be as prescribed by the bank or financial institution. (3) No revenue stamp fee shall be charged on any kind of deeds or documents related with the bank or financial institution. 120. Expenditures Management: The Rastra Bank may issue necessary directives on preliminary, incorporation, administrative, commercial and managerial as well as other expenditures of bank or financial institutions. 121. Statement of Assets to be submitted: A Director, official and Chief Executive of a bank or financial institution shall have to submit the statement of entire movable and immovable assets and liabilities in his/her name and in name of his/her family members within sixty days from the date of completion of every fiscal year to concerned Bank and information thereof shall be given to the Rastra Bank. While submitting such statement, the source of such income shall also have to be mentioned. 122. Credit, Liabilities and Titles against the Collateral of Credit may be purchased or sold: Notwithstanding anything contained in prevailing laws of Nepal and unless otherwise provided for in the agreement concerning credit, the title over the credit given by any bank or financial institution to any person or of the liability it has.

113 assumed and of the movable or immovable assets pledged as collateral (the title of mortgage) may also be purchased or sold. 123. Settlement of Disputes: (1) In the event of any dispute incurred between banks or financial institutions, such dispute shall have to be settled in mutual understanding. (2) In case the dispute could not be settled through mutual consent in accordance with Sub-Section (1), the Rastra Bank shall settle the dispute through mediation or other methods of disputes resolution as per the prevailing laws. (3) The decision made by the Rastra Bank pursuant to Sub-Section (2) shall be final. 124. Not to be liable for acts done in good faith: (1) The official or employee of the Rastra Bank or of a bank or financial institution shall not be held individually or collectively liable for any act carried out in good faith under this Act or Rastra Bank Act or the Rules or Byelaws framed hereunder or the orders or directives issued thereunder. (2) If any kind of lawsuit is filed against the Rastra Bank, a bank or financial institution or an official thereof in relation to any loss or damage caused or likely to be caused by any act carried out or supposed to be carried out in good faith for the compliance with this Act or Rastra Bank Act or the Rules or Byelaws framed hereunder or the orders or directives issued thereunder, the concerned institution shall bear the expenses of such lawsuit. Provided that in case of act committed out of enmity, negligence or malafide intention, the concerned person shall be liable and Rastra Bank or a bank or finance company shall not bear the expenses to be incurred on such matter. 125. Actions taken not to be invalidated: No action taken by a Director or Board of Directors shall be invalidated solely for the reason of commission of any irregularity in appointment of the Director of a bank or financial institution or formation of any committee or for vacancy of the office of Director..

114 126. Study Committee or Sub-committee may be formed: (1) The Rastra Bank may, in order to carry out overall study on banking and financial laws, credit recovery, stability of financial sector, judicial development, and contemporary reforms on the financial system and to submit the report, form an expert study committee comprising representative of the Rastra Bank, bank or financial institutions and concerned agencies and experts. (2) The Rastra Bank may form sub-committees as may be necessary for the purpose of Sub-Section (1). (3) The functions, duties and powers of, and facilities of the Study Committee as referred to in Sub-Section (1) or of the sub-committee as referred to in Sub-Section (2) shall be as specified by the Rastra Bank. 127. Oath of Office: (1) Director, official, Chief Executive or employee of a bank or financial institution shall, prior to assuming the duties of his or her office, take an oath of office and secrecy according to the format as referred to in the Annex. (2) The oath referred to in Sub-Section (1) shall be administered by the Rastra Bank to the Chairperson, by the Chairperson to other Directors and Chief Executive and by the Chief Executive or official designated by him/her to other official and employees. 128. Amendment of Memorandum of Association and Articles of Association: Notwithstanding anything contains in prevailing laws, amendment to the Memorandum of Association and Articles of Association of the bank or financial institution shall not be applicable unless approved by the Rastra Bank. 129. This Act shall be Prevailed: (1) On the matters as referred to in this Act or the Rules, Byelaws, Guidelines or Orders or Directives issued under this Act, it shall according to those provisions and in other matters, it shall be according to Rastra Bank Act and other prevailing laws..

115 (2) The provisions of the Rastra Bank Act shall be applied on the activities of regulation, inspection and supervision and settlement of the bank or financial institutions established under this Act. 130. Power to Remove Difficulties: (1) If any difficulty arises in enforcement of any provision of this Act, the Rastra Bank may, with the approval of the Government of Nepal, issue necessary orders to remove such difficulty. (2) While issuing order for removing difficulty pursuant to Sub-Section (1), reasons and justification thereof shall have to be mentioned. 131. Power to issue Order or Direction: The Rastra Bank may, subject to this Act or the Rules or Byelaws framed hereunder, issue order or directive to bank or financial institution as may be necessary. 132. Power to frame Rules, Byelaws: (1) The Rastra Bank may, if it deems necessary, frame and enforce necessary Rules and Byelaws for implementing this Act. (2) The Rules framed by the Rastra Bank pursuant to Sub-Section (1) shall be commenced only after granting approval by Government of Nepal. 133. Power to frame Byelaws and Procedures: (1) The Board of Directors may, in order to operate its institutional, administrative and business transactions in systematic manner, frame byelaws on any or all of the following matters subject to this Act and the terms and conditions, limitations and norms as prescribed by the Rastra Bank:- (a) On appointment, promotion, transfer, dismissal, remuneration, allowances, gratuity, pension, leave, code of conduct, discipline, and terms and conditions of services and formation of such services, (b) On financial administration of the bank or financial institution, (c) On writing off of credits,.

116 (d) On other matters as prescribed by the Rastra Bank from time to time. (2) In addition to the matters as referred to in Sub-Section (1), a bank or financial institution may frame procedures/guidelines on the following matters as may be necessary:- (a) On meeting of the Board of Directors and procedures of the General Meeting, (b) On delegation of authority by the Board of Directors to Director, Chief Executive, Official or employee, (c) On the terms and conditions of contract to be concluded on behalf of bank or financial institutions, (d) On the procedures of the use of seal of bank or financial institutions, (e) On valuation of non-banking assets to be mortgaged at the time of disbursement of credits or at the time of auction, (f) On other actions and proceedings to be carried out under this Act by bank or financial institutions, (g) On crushing documents and papers, (h) On other matters as prescribed by the Rastra Bank from time to time. 134. Repeal and saving: (1) The Banks and Financial Institutions Act, 2006 is hereby repealed. (2) Acts carried out and actions taken according to the Act repealed pursuant to Sub-Section (1) shall be deemed to have been taken under this Act..

117 Annex (Relating to Sub-Section (1) of Section 127) Format of Oath of Office I, …………………solemnly and sincerely resolve that as I have been appointed/nominated/elected to the office of …………............of the ………………………….bank or financial institution, I shall perform the duties of my office according to the prevailing Act, Rules and policies, regulation and directives of the Rastra Bank having always taken account of promotion of financial system and interests of the bank or financial institution and with honesty. I also do solemnly resolve with high sense of honesty and truth that I shall not disclose the transactions and matters of the bank or financial institution to be kept confidential and except in case authorized by the Board of Directors or compelled by the law, I shall not disclose, directly or indirectly, in any manner any information or matter that came to my knowledge as in the capacity of …………, whether I shall continue in the office or discontinue it. The person taking the oath The person administering the oath Name: Name: Designation: Designation: Signature: Signature: Date: Date: Date of authentication: 2074-01-10 BS (April 23, 2017 AD).