NRB eases regulations for foreign investment in listed companies

Kathmandu: In a significant move, Nepal Rastra Bank (NRB) has announced regulatory changes exempting foreign investments in listed companies from the need for central bank approval. The third amendment to the NRB Foreign Investment and Foreign Loan Management Bylaws 2021 aims to streamline and encourage foreign participation in Nepal’s stock market.

Under the amended regulations, foreign investors no longer require NRB’s approval to invest in shares of companies listed on the stock exchange or for changes in share ownership post-investment. However, foreign investors must submit written information in the specified format in Schedule-2 of the regulations before importing or sending foreign currency into Nepal, following approval from the concerned authority.

The amendment outlines procedures for handling unutilized foreign investments within specified timeframes, allowing for extensions if necessary. Banks and financial institutions will deposit the foreign investment amount into the account of the concerned company or industry in Nepal if foreign investment is not introduced within the stipulated timeframe.

The requirement for NRB’s approval is waived not only for investments in listed companies but also for foreign investments in industries defined as ‘sick’ under the Industrial Enterprises Act 2020. Additionally, foreign investments that do not diminish the shareholding ratio of Nepali shareholders in local industries also do not require NRB’s approval.

Revised regulations clarify that repatriating amounts exceeding the approved foreign investment is not mandatory. Such excess can be accounted for as foreign investment upon receiving approval from the foreign investment approval body. This flexibility allows for bringing in more than the approved amount of foreign investment, with the condition that subsequent approval covers the excess amount and all related accounting provisions are adhered to.

Industries with foreign investments and borrowers of foreign loans are required to submit detailed information as requested by the NRB. The regulation also eases the documentation process for reinvesting profits earned from foreign investments, eliminating the need for a certified copy of the document revealing the identity of the real owner in certain cases.