Nepal Rastra Bank Paves the Path for Foreign Investments in Secondary Market, No Approval Required for NEPSE-Listed Companies

The Nepal Rastra Bank (NRB) has recently introduced amendments to the Nepal Rastra Bank Foreign Investment and Foreign Loan Management Regulations 2078, signaling a significant shift in its stance on foreign investments in the Nepalese share market. According to the updated regulations, the NRB has waived the requirement for its approval for foreign investments in companies listed on the Nepal Stock Exchange Limited (NEPSE).

In a public statement, the NRB outlined the specific areas where prior approval is no longer necessary for foreign investments. These include foreign investments in Nepali industries that do not diminish the overall shareholding ratio of Nepali shareholders, foreign investments in companies already listed on the stock market, and foreign investments in ailing industries as per the Industrial Business Act, of 2076. Notably, the NRB clarified that approval is not mandated for foreign investment in companies within these sectors even after a change in share ownership.

However, the central bank emphasized that in all other areas, explicit approval from the NRB is still a prerequisite for the movement of foreign currency into or out of Nepal for foreign investment purposes following changes in share ownership. To initiate this process, foreign-invested industries/companies or foreign investors must submit a detailed application, including the specified documents outlined in Schedule 4, to the relevant unit. The NRB commits to deciding within 15 working days from the date of receiving the application and accompanying documents, after which the applicant will be informed in writing.

The procedural framework further mandates that banks and financial institutions are responsible for confirming and depositing the approved foreign currency for foreign investment directly into the account of the pertinent industry or company. This strategic move by the NRB is anticipated to streamline and facilitate foreign investments in the Nepalese market, fostering a more investor-friendly environment while maintaining regulatory oversight in critical sectors.