Banks need to bring $30 million to open branches

Foreign banks wishing to open a branch in Nepal are required to bring in at least $30 million to get a license to start banking services, according to the central bank’s regulation.
In accordance with Nepal's commitment made to the World Trade Organisation (WTO) during its accession in 2004, the country is obligated to open the door to foreign banks to do wholesale banking in Nepal from January 1, 2010.
According to a new policy of Nepal Rastra Bank (NRB), regarding foreign banks, hopeful banks have to invest at least another $5 million for each branch they want to set up here.
"The capital requirement was fixed as per the WTO's principle of national treatment for foreign companies too," NRB executive director Maha Prasad Adhikari said.
Given Nepal's commitment to allow foreign banks to do only wholesale banking, the central bank is opening the door for them to provide only wholesale banking services.
Foreign banks wishing to enter Nepal must be at least BBB rated as per the evaluation of international rating agencies like Fitch, Standard & Poor’s or Moody’s, as per NRB policy.
They also have to bring a no-objection letter issued by the regulatory authority of their home country to apply to open a branch here.
Foreign banks are also required to follow the rules and regulations of NRB. They can repatriate their profits to their home country after paying taxes, fees and other liabilities as per the laws of Nepal. But they have to obtain the approval of the central bank before taking away the income, according to the NRB regulation.
Branches of foreign banks which are scrapped or liquidated could get their licenses scrapped in Nepal too, the NRB policy states.
However, they will be allowed to open only one branch in the first phase and depending on their performance the licence foer the other branches could be issued, the central bank said.
Similarly, they cannot accept deposits less than Rs 100 million and issue credit of less than Rs 300 million. “They can invest only in large projects like hydro-power, aviation, tourism and railway,” the central bank said.
Contrary to popular speculation that international banks would throng domestic market from 2010, none of the banks have applied so far. According to the NRB officials, they might be waiting for the central bank’s policy.
The opening of branches of international banks in Nepal will particularly not affect the general public but it might help kick start stalled economy by injecting more investment for large infrastructure projects and creating more employment opportunities.