Nepal Rastra Bank (NRB) has directed foreign investors to submit a record of their investments in Nepal from abroad. Issuing a public notice on Monday, the central bank said foreign investors have to report investments transferred to Nepal.

This has to be done even after getting approval from the Department of Industry (DOI) or Investment Board Nepal (IBN) to start a company and permission from NRB to bring funds in terms of equity or loans to set up a company, the central bank said.

Foreign investors have to submit records of all funds they have brought till date by the end of this fiscal year.

In case of failure to submit such records to NRB, the central bank will not be liable to provide foreign exchange facility to foreign investors for repayment of interest and repatriation of dividend and capital, the central bank said in the notice.   

Despite repeated government declarations about providing a one-window system to cut paperwork for foreign investors and eliminate the need to visit diverse government agencies in a bid to lure foreign investment, the latest decision by the central bank means the addition of one more step in the foreign investment process.

A foreign investor will need to approach NRB twice to complete all the steps for making an investment in Nepal.

“In order to increase foreign investment, the government needs to decrease the number of interactions a foreign investor has with governmental agencies and try to provide service from a single window,” said an official of a foreign company.

“Instead of requiring the foreign investor to provide this sort of record, NRB should have obtained all the records from the commercial banks where the funds are actually transferred. It is already cumbersome to visit NRB once, and this decision will compel us to visit it twice.” Meanwhile, NRB said it had published the notice to enable it to prepare an up-to-date stock of the actual foreign exchange liability of the country.

“The Foreign Exchange Act requires foreign investors to submit records of their investment to the central bank,” said Bhisma Raj Dhungana, head of the Foreign Exchange Department at NRB. “We had to issue such a notice as we have found that many foreign investors have not been complying with the legal provision.”

The central bank has issued such notices on four occasions in the past, but there was no effective compliance. “NRB is determined to strictly implement this provision this time,” said Dhungana.

“Any foreign investor failing to comply will not be allowed to repatriate their investment.” 

Professionals involved in managing foreign funds said complying with the decision would not be a big issue. “It looks like the central bank wants proper records of foreign investments in Nepal,” said Siddhant Raj Pandey, CEO of Business Oxygen which manages private equity funds of International Finance Corporation. “We can live with it as long as it doesn’t contribute to procedural delays.”