FINANCIAL PROVISIONS OF NEPAL RASTRA BANK (NRB)

Hi,

For those people who is curious to know about the central bank of Nepal, I have written this blog to help you further. 

A ) Capital of the Bank :

In simple language, Capital refers to the amount invested in the business by its owner. It is the liabilities of any business. It is the primitive source of finance that is used to operate any business. 

As per the Nepal Rastra Bank Act, 2002, the prescribed Capital of the Bank prescribed was one billion Nepalese rupees. However, it has been changed to five billion Nepalese rupees . 

The Capital of the Nepal Rastra Bank is received from the Government of Nepal. 

The basic rule regarding this is that, neither this Capital is transferred nor any burden of debt is placed upon it.

However, the Government of Nepal has the power to alter the above capital limit as deems fit.  But, for such alterations, the Government of Nepal consults the Nepal Rastra Bank.

B) How the bank deals with it Net Profit or Net Loss ? 

As we know, each and every business operations has either profits or loss. So, is the case with the central banks. Here, my focus is on the profit and loss account of Nepla Rastra Bank.

Nepal Rastra Bank prepares the account of its net profit and loss in each Fiscal Year. This account is prepared in accordance with the international accounting standard. The main objective is to reflect true and fair view of the books of accounts as per the international norms. 

Note :

• While preparing profit and loss account, the profit made and the loss sustained or the loss yet to be appropriated and the net valuation gains or loss is reconciled.

• Similarly, Bad or doubtful debts and depreciation of property is deducted therefrom.

a ) How the bank deals with its Net Profit ?

Profits are the financial benefits which is remained after settling the revenues against all costs. If the bank makes profit in any fiscal year, then the distribution and use of such profits are made in following priority order :-

• The amount equal to 5 % of the net profit of each fiscal year is to be allocated from the profits earned by the bank. This profits are kept in the monetary liability fund until 5 % of the total monetary liability of the Bank is met. 

• Similarly, an amount prescribed by the Board (not less than 10 % of the net profit of the Bank ) is allocated in the general reserve fund which is established by the Bank.

• While allocating an amount in the general reserve fund, an additional amount is appropriated to cover the capital expenses which is referred in the annual budget of the Bank.

• The amount equal to the revaluation profit is kept in the revaluation reserve fund.

• After the above appropriations, the Board appropriates the remaining profit (if any ) in other funds as thinks fit and pays the balance amount to Government of Nepal.

Note :

• The amount deposited in the monetary liability fund is used only for the purpose of fulfilling the financial liability of the Bank.

• The amount allocated to general reserve fund shall be used only for the purpose of recovering the loss.

b ) How the bank deals with its Net Loss ?

Loss is simply a negative profit. Nepal Rastra Bank may suffer loss. So, in order to sustain net loss in any fiscal year, following allocations are made:-

Case 1 : 

• If the total operation loss and revaluation loss have been included in the net loss, then, the amount of the total operation loss is to be charged to the general reserve fund or to the capital account. However, the amount of revaluation loss is debited to the revaluation reserve fund. 

• While making such allocation, if the revaluation reserve fund is also at loss, then, it will be debited to general reserve fund or the capital account. 

Case 2 : 

• If the net loss is due to accumulation of the total operation loss and the revaluation loss, the amount of such net loss shall be debited to the revaluation fund.

• If the balance of the revaluation reserve fund would be negative after such allocation, then, it will be debited to the general reserve fund or the capital fund.

Note :

• The Government of Nepal will bear the loss that is unable to be adjusted after making the above allocations.

C ) Annual Budget: 

As we know, budget is the quantitative expression of different plans which is set for definite period of time. They are predetermined. All the works are to be made within the funds allocated for particular head. Annual budgets are the yearly set budgets.

The Board of Nepal Rastra Bank approves the estimated budget of incomes and expenditures and also approves the programs for the coming fiscal year. This approval is given prior to the beginning of each fiscal year. 

However, the Board may evaluate and amend the approved budget in each three months. This is done on the basis of actual position and the matters that can be estimated. Such budget is finally sent to Government of Nepal .




( For more details regarding objectives, powers, functions, duties, money, banknote and foreign exchange policies Nepal Rastra Bank, click on the above links )

COMPANIES (AUDITOR'S REPORT) ORDER, 2016

Ministry of Corporate Affairs (MCA) of India has issued Companies (Auditor's Report) Order, 2016 . This order is made applicable for Fiscal Year on or after April 1, 2015.

I believe that a law should be read in the form as if it is drafted in order to understand the real intention of the law maker. The whole law is as follows :

COMPANIES (AUDITOR'S REPORT) ORDER, 2016 - SUPERSESSION OF COMPANIES (AUDITOR'S REPORT) ORDER, 2015

NOTIFICATION SO 1228(E)[F.NO.17/45/2015-CL-V], DATED 29-3-2016

In exercise of the powers conferred by sub-section (11) of section 143 of the Companies Act, 2013 (18 of 2013) and in supersession of the Companies (Auditor's Report) Order, 2015 published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii), vide number S.O. 990 (E), dated the 10th April, 2015, except as respects things done or omitted to be done before such supersession, the Central Government, after consultation with the, committee constituted under proviso to sub-section (11) of section 143 of the Companies Act, 2013 hereby makes the following Order, namely:-

Short title, application and commencement

1. (1) This Order may be called the Companies (Auditor's Report) Order, 2016.

(2) It shall apply to every company including a foreign company as defined in clause (42) of section 2 of the Companies Act, 2013 (18 of 2013) [hereinafter referred to as the Companies Act], except—

(i)		a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(ii)		an insurance company as defined under the Insurance Act, 1938 (4 of 1938);
(iii)		a company licensed to operate under section 8 of the Companies Act;
(iv)		a One Person Company as defined under clause (62) of section 2 of the Companies Act and a small company as defined under clause (85) of section 2 of the Companies Act; and
(v)		a private limited company, not being a subsidiary or holding company of a public company, having a paid up capital and reserves and surplus not more than rupees one crore as on the balance sheet date and which does not have total borrowings exceeding rupees one crore from any bank or financial institution at any point of time during the financial year and which does not have a total revenue as disclosed in Scheduled III to the Companies Act, 2013 (including revenue from discontinuing operations) exceeding rupees ten crore during the financial year as per the financial statements.

Auditor's report to contain matters specified in paragraphs 3 and 4

2. Every report made by the auditor under section 143 of the Companies Act, 2013 on the accounts of every company audited by him, to which this Order applies, for the financial years commencing on or after 1st April, 2015, shall in addition, contain the matters specified in paragraphs 3 and 4, as may be applicable:

Provided the Order shall not apply to the auditor's report on consolidated financial statements.

Matters to be included in the auditor's report

3. The auditor's report on the accounts of a company to which this Order applies shall include a statement on the following matters, namely:—

(i)		(a) whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;
		(b) whether these fixed assets have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account;
		(c) whether the title deeds of immovable properties are held in the name of the company. If not, provide the details thereof;
(ii)		whether physical verification of inventory has been conducted at reasonable intervals by the management and whether any material discrepancies were noticed and if so, whether they have been properly dealt with in the books of account;
(iii)		whether the company has granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. If so,

(a)		whether the terms and conditions of the grant of such loans are not prejudicial to the company's interest;
(b)		whether the schedule of repayment of principal and payment of interest has been stipulated and whether the repayments or receipts are regular;
(c)		if the amount is overdue, state the total amount overdue for more than ninety days, and whether reasonable steps have been taken by the company for recovery of the principal and interest;

(iv)		in respect of loans, investments, guarantees, and security whether provisions of sections 185 and 186 of the Companies Act, 2013 have been complied with. If not, provide the details thereof.
(v)		in case, the company has accepted deposits, whether the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the rules framed thereunder, where applicable, have been complied with? If not, the nature of such contraventions be stated; If an order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal, whether the same has been complied with or not?
(vi)		whether maintenance of cost records has been specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 and whether such accounts and records have been so made and maintained.
(vii)		(a) whether the company is regular in depositing undisputed statutory dues including provident fund, employees' state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as on the last day of the financial year concerned for a period of more than six months from the date they became payable, shall be indicated;
		(b) where dues of income tax or sales tax or service tax or duty of customs or duty of excise or value added tax have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending shall be mentioned. (A mere representation to the concerned Department shall not be treated as a dispute).
(viii)		whether the company has defaulted in repayment of loans or borrowing to a financial institution, bank, government or dues to debenture holders? If yes, the period and the amount of default to be reported (in case of defaults to banks, financial institutions, and government, lender wise details to be provided).
(ix)		whether moneys raised by way of initial public offer or further public offer (including debt instruments) and term loans were applied for the purposes for which those are raised. If not, the details together with delays or default and subsequent rectification, if any, as may be applicable, be reported;
(x)		whether any fraud by the company or any fraud on the Company by its officers or employees has been noticed or reported during the year; If yes, the nature and the amount involved is to be indicated;
(xi)		whether managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act? If not, state the amount involved and steps taken by the company for securing refund of the same;
(xii)		whether the Nidhi Company has complied with the Net Owned Funds to Deposits in the ratio of 1: 20 to meet out the liability and whether the Nidhi Company is maintaining ten per cent unencumbered term deposits as specified in the Nidhi Rules, 2014 to meet out the liability;
(xiii)		whether all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards;
(xiv)		whether the company has made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and if so, as to whether the requirement of section 42 of the Companies Act, 2013 have been complied with and the amount raised have been used for the purposes for which the funds were raised. If not, provide the details in respect of the amount involved and nature of non-compliance;
(xv)		whether the company has entered into any non-cash transactions with directors or persons connected with him and if so, whether the provisions of section 192 of Companies Act, 2013 have been complied with;
(xvi)		whether the company is required to be registered under section 45-IA of the Reserve Bank of India Act, 1934 and if so, whether the registration has been obtained.

Reasons to be stated for unfavorable or qualified answers

4. (1) Where, in the auditor's report, the answer to any of the questions referred to in paragraph 3 is unfavorable or qualified, the auditor's report shall also state the basis for such unfavorable or qualified answer, as the case may be.

(2) Where the auditor is unable to express any opinion on any specified matter, his report shall indicate such fact together with the reasons as to why it is not possible for him to give his opinion on the same.

FOREIGN EXCHANGE POLICY, REGULATION, RESERVE AND GOVERMENTAL RELATIONSHIPS OF NEPAL RASTRA BANK (NRB)

Foreign Exchange Policy, Regulation and Reserve

In order to enhance the knowledge about the foreign exchange policy, regulations and reserve related issues of Nepal Rastra Bank, I have written this separate blog.

Being a central bank of Nepal, the 'Bankers Bank' has lots of roles and responsibilities. As it is said a big power comes with a big responsibility. So, is the case with Nepal Rastra Bank. For more details regarding Nepal Rastra Bank please click the following link :

https://managementknowledges.blogspot.com/2016/12/nepal-rastra-bank-and-its-restricted.html

https://managementknowledges.blogspot.com/2016/12/objectives-function-duties-and-power-of.html

The overall issues regarding foreign exchange policy, regulation, reserve and the governmental relations of Nepal Rastra Bank are as follows:

Foreign Exchange Policy: 

The Nepal Rastra Bank has the full authority to formulate and implement any foreign exchange policy of Nepal.

Management of Foreign Exchange: 

The central bank manages the foreign exchange. Nepal Rastra Bank has the following powers to manage the foreign exchange: -

• To issue license to the persons willing to deal in foreign exchange transaction.
• To frame rules and bylaws, orders, directives and circulars in order to regulate dealings in the foreign exchange transaction done by the foreign exchange dealer.
• To inspect, supervise and monitor the foreign exchange dealer.
• To set the bases, limitations, terms and conditions for the transaction of the foreign exchange dealer. 
• To provide sound system for the foreign exchange rates of the Nepalese currency.

Particulars of Foreign Exchanges Dealings: 

Nepal Rastra Bank compels the license-holder to submit the detailed particulars regarding exchange of foreign currency and the transaction relating to it. However, the time duration for submitting such particulars, the format and other documents relating to it  are prescribed as and whenever the bank deems fit.  Therefore, it is the duty of the concerned license holder to submit the particulars and the documents whenever demanded.

Dealing in Foreign Exchanges: 

The Bank may purchase and sell foreign exchanges, gold and precious metals. The purchase and sale to be made by the Bank can be through:

•  Spot
• Advance exchange rate
• Swap
• Options

- the similar types of other instruments, cash or negotiable instrument. 

The Bank deals in foreign exchange after fixing its buying and selling rates. The basis, limitations and conditions of such dealing are prescribed by the Bank.

Foreign Exchange Reserve: 

The Bank mobilizes the foreign exchanges reserve. Such reserve are denominated in the respective foreign exchange and such reserve consists of the following assets:-

• Gold and other precious metals held by the Bank.

• Foreign currencies held by the Bank.

• Foreign currencies held in the accounts of the Bank on the books of a foreign central bank or other foreign banks.

• Special drawing rights (SDR) held by the Bank at the International Monetary Fund.

• Bill of exchange, promissory note, certificate of deposit, bonds, and other debt instrument payable in convertible foreign currencies issued by any debtor or liability holder and held by the Bank.

• Any forward purchase or repurchase agreements of the Bank made with or guaranteed by foreign central banks or public international financial institutions, and 

• Any futures and option contracts of the Bank providing for payment in freely convertible foreign currency.

While selecting the assets due consideration is given to the Bank's capital and liquidity . This is done to maximize earnings. The Bank maintains international reserve at a level, which is sufficient for:

•  Execution of monitory and exchange rate policies. 
•  Prompt settlement of the international transaction.

If the international reserves is :

• Declined or
• In a situation of facing danger of declining 

- to such an extent that the execution of the monetary or exchange rate policies in the prompt settlement of the country's international transactions is hampered then, the Bank submits a report to Government of Nepal on following matters :

• The international reserves position .
• The main causes which have led or may lead to such a decline.
• Recommendations to overcome the situations.

Therefore, until the situation is favorable, the Bank keeps reporting and recommending the Government of Nepal. Till then the Bank holds the foreign exchange reserve in its balance sheet.

Issuance of Debt Bond Against Gold and Foreign Currency: 

The central bank may issue one or more types of debt bond which is denominated in gold or foreign currency. This is done for certain purpose after taking prior  approval from Government of Nepal. The types, duration, payment of principal and interest and other matters of the debt bond to be issue is as prescribed by the Bank.

International Clearing and Payment Agreements: 

The central Bank  has the power to enters into clearing and payment agreements with public or private central clearing unions domiciled abroad. The Bank may enter into other necessary agreements as it thinks fit. But, this is done only after taking prior approval of the government.

NEPAL RASTRA BANK AND ITS GOVERNMENTAL RELATIONSHIPS

The  overall governmental relationships of Nepal Rastra bank with government of Nepal are explained as follows :

Banker, Advisor and Financial Agent:

The Nepal Rastra Bank is the banker and financial advisor of Government of Nepal. This bank act as a financial agent of the Kingdom of Nepal. Government of Nepal shall consults the Bank on any matters that are within the its jurisdiction. Government of Nepal consults the bank while preparing annual budget plan for the country and on the matters related to domestic debt and overdrafts. The Bank submits a pre-budget review report to Government of Nepal each year on the economic and financial matters.

Opinions and Information Relating to External Debt: 

Government of Nepal consults Nepal Rastra Bank while taking loan from external sectors. The consultation includes the subjects matter on:

• Amount of loan
• Terms and conditions of the loan and 
• The repayment of loan. 

Government of Nepal also informs the Bank about following matters : 

• when any kind of external loans have been received. 
• while granting approval to private and public institutions to raise loan-creating liability in foreign exchange. 

Government of Nepal, public institution or private sector also gets informed by the Nepal Rastra Bank about the agreements that have been made while creation of liability in foreign exchange.

Deposit Collection: 

The Nepal Rastra Bank accepts the deposits of Government of Nepal or other bodies as prescribed by Government of Nepal. While accepting deposits, the Bank :

• Receives and disburse monies, 

• Keeps accounts therein, 

• Provides banking services related thereto. 

The central bank even authorizes commercial banks and other financial institutions to conduct the transaction by mentioning the terms and conditions .

Functions of Fiscal Agent: 

The central bank acts as a fiscal agent of Government of Nepal. The tasks are done within the agreed terms and conditions on the following matters :-

•  Marketing, purchasing and selling of debt bonds issued by Government of Nepal and to act as registrar and transfer agent.
• Payment of the principal, interest and other fees of the government debt bonds.
• Any other necessary functions are carried out as the agent as specified.

Bank may ask for Particulars, Statistics and Documents:

Nepal Rastra Bank can  asks for any :

• Particulars
• Statistics 
• Documents 

- necessary for conduct of its business from the concerned bodies. It becomes the duty of the concerned bodies to provide the particulars, statistics and documents whenever asked .

Consultation on the Matter of Law Reform: 

The Nepal Rastra Bank is consulted on any proposals by the concerned entities for legislation with respect to any matters that relates to Bank. objectives or that otherwise are within its fields of competence, including monetary policy and its operations, credit, the balance of payments, foreign exchange, and banking, before they are submitted for amendment or legislative action. The Bank has powers to submit proposals to Government of Nepal for enacting new law or amending the existing laws on the subjects relating to the objectives of the Bank or area of its competence such as monetary policies and its operation, credit, balance of payment, foreign exchange and banking.

Credit to Government of Nepal and Purchase of Government Debt Bonds: 

• The Bank is not authorized to provide any type of financial assistance to the Government of Nepal or an institution under the full or substantial or partial ownership of Government of Nepal. However, the Bank may extend the credit facility to the Government of Nepal with a condition to repay within 180 days.

• The Bank can extend a special credit of long term loan to the Government of Nepal only on account of subscription and similar payments resulting from the membership of the Nepal with international organization. 

• The Nepal Rastra Bank disburses credit extension to Government of Nepal or an institution under full or substantial or partial ownership of Government of Nepal only in - Nepalese rupees. 

• Such credit shall be certified by negotiable debt bond issued by Government of Nepal and delivered to the Bank. 

• Such debt security should have the maturity corresponding to the maturity of the extension of credit and should bear the interest at market rate.

• There must be a written agreement executed between Government of Nepal and the Bank. Such agreement should clearly stipulate the principal amount of the loan, limit on a line of credit, the maturity, applicable rates of interest and other charges.

Here, " Negotiable Debt Bond" means the debt bond issued in the form of promissory note. 

NOTE:

It is to be noted that, the amount of overdraft provided by the Bank to Government of Nepal will not be :

• more than 5% of the revenue income of Government of Nepal

-  in the proceeding fiscal year at any point of time.

However, while computing such revenue income, following should not be included :

• The amount of borrowing, 
• Grants or 
• Any other form of financial assistance or
• Income received from the sale of property 

Government of Nepal must make the payment of the overdraft within one hundred eighty days at the prevailing interest rate either in the form of cash or marketable debt bond. 

The total amount of debt bond purchased by the Bank from Government of Nepal and taken into its ownership will not be :

•  more than 10% of the revenue income 

-in the proceeding fiscal year. 

However, In the following circumstances, the debt bond issued by Government of Nepal and purchased by the Bank shall not be treated as the credit extension :-

• If the purchase is made in the secondary market, for the operation of open market consistent with the monetary policy of the Bank.

• If the purchase is made in the primary market, when it is necessary in the opinion of the Bank, to maintain stability in the market at the time of primary issue of such securities and such securities are divested within 60 days of purchase.

• If the debt bond is purchased by the Bank from Government of Nepal and retained in its ownership .

For more details regarding Nepal Rastra Bank please click the following link :

https://managementknowledges.blogspot.com/2016/12/money-banknote-and-coins.html

Picture Credit: blog.pacificforeignexchange.com and rospolitics.ru

CURRENCY OF NEPAL AND THE RELATED RULES

MONEY, BANKNOTE AND COINS

Money is the underlying basis upon which whole economy of the entire nation depends upon. The small poke can make the revolutionary change in the economy of country. So, the exclusive power relating to money is given to the central bank of the country.

People often thinks that "The government can issue as much money as it wants". 

Do you have the same level of perceptions ?.

Today, i am writing the blog to make you aware about how the money, banknotes and coins operates in Nepal. I have tried to easily explain the concepts.

The central bank of Nepal is Nepal Rastra Bank. 

(For more detail about the central bank, objectives, function, duties and powers of Nepal Rastra Bank- please refer to the above link )


First lets have an overview about monetary unit, banknotes and coins. 

Monetary Unit: 

The 'Rupee' also prounced as 'Rupaiyaan' - is the monetary unit of Nepal. It is a legal tender made within the Nepal. The Government of Nepal provides guarantee for such Rupee.

Banknotes and Coins: 

The Nepal Rastra Bank has monopoly over the issue of banknotes and coins in the country. Such notes and coins is legal tenders made within the Nepal.

Unlike other central banks, Nepal Rastra Bank issues notes, only against:

• The security and 

• The liability 

- of such issued notes . This issue shall be equal to the value of property kept as security.

Practically, 

At least 50% of the property is kept as security which shall be in the form of following:

• Gold 

• Silver 

• Foreign currency 

• Foreign securities 

• Foreign bills of exchange 

However, the remaining percentage is in the form of following:

• Coins 

• Debt Bond (issued by Government of Nepal) 

• Promissory note (payable in Nepal) 

• Bills of exchange (payable in Nepal) 

Such Promissiory Note or Bill of Exchange is payable within specified period (not exceeding 18 months) from the date of repayment by bank.
However, 

with the permission taken by the goverment of Nepal, the ratio of property kept as a security must be at least 40% of the property in the form of following: 

• Gold 

• Silver 

• Foreign currency 

• Foreign securities 

• Foreign bills of exchange 

Similarly, the remaining percentage is in the form of following:

• Coins 

• Debt Bond (issued by Government of Nepal) 

• Promissory note (payable in Nepal) 

• Bills of exchange (payable in Nepal) 

Such Promissiory Note or Bill of Exchange is payable within specified period (not exceeding 18 months) from the date of repayment by bank.


NOTE:

For this purpose, the valuation of property is done in the following manner mentioned as follows:-

• The price of Gold - at the rate fixed by Government of Nepal, on the recommendation of the Board. 

• The price of Silver - at the rate deemed appropriate by the Board. 

• The price of Foreign Currencies - at the exchange rate fixed by the Bank. 

• The price of Debt Bond issued by Government of Nepal - at the rate deemed appropriate by the Board on the basis of market rates. 

• The price of Foreign Securities -at the rate deemed appropriate by the Board on the basis of market rates. 

• The price of Bills of Exchange - at the rate deemed appropriate by the Board on the basis of market rates. 

• The price of Coins - at the rate of face value. 

The Present highest currency denomination of paper money in Nepal is Rupee of thousand and the present highest currency denomination of coin in Nepal is Rupee of ten.

However, the central bank of Nepal has the authority of issuing the bank notes of various denominations whenever it thinks fit. While issuing banknotes in this way, the figures appearing in the notes, size and denominations shall be as approved by Government of Nepal. 

The Board of the Nepal Rastra Bank decides about the -

• Figures 

• Internal security arrangements 

• Materials to be used for printing banknotes and other materials. 

Similarly, the government of Nepal consults the Board of the bank in order to declare that - banknote of any denomination will cease to be legal tender in any place other than, the prescribed place or office having published a notification in the Nepal Gazette.


NOTE:

It is to be noted that the Nepal Rastra Bank don't reissue the notes, which are :

• Torn 

• Defaced or 

• Excessively soiled. 

Similarly, with the approval of Government of Nepal, the bank can do following activities:

• Mint and bring into circulation the coins of whatever metal or mixture of metals . 

• Bring into circulation having minted them in Mint on specials occasions. 

• If it deems appropriate, then get such coins minted in any foreign Mint. 

However, if the coins gets minted once with the approval of the government and the same is to be re-minted again , in such case no approval is required again. Similarly, the Bank may, with the approval of Government of Nepal, mint the coins which are sent for minting by a foreign government.

Following points are to be generally understood that :

Banknotes and Coins are Acceptable to all:


The banknotes and coins are acceptable to all up to the extent of the amount of face value for repayment of all types of public or private debts within the Kingdom of Nepal.

Measurement, Weights and Size of Coins:
The face value, measurement, weight, size and other features of the coins is issued by Nepal Rastra Bank under the Nepal Rastra Bank Act which is prescribed by the Board.

Issuance of Currency and Security:

All the matters relating to:

• Printing of banknotes 

• Minting coins 

• Providing security to the notes issued banknotes and coins. 

• Keeping them in appropriate manner 

• The matter of safe keeping or destroying the old banknotes or coins which are not in circulation 

• Plate and dies 

- are done as per the rules prescribed by the Nepal Rastra Bank.

Exchange of Currency:

The Nepal Rastra Bank without any fee or charge - changes a banknote or coin with legal tender in Nepal. This is done with the banknotes or coins of same denomination or of different denominations of the equal value.

SOILED OR COUNTERFEIT CURRENCY :

It is a general fact that most of the people should be aware about the currency they use in the country.


The common question running into most of mind is -

'What do the central bank do with the soiled and counterfeit currency? '
So, in order to help you to get out this doubted general queries, i have made a sincere effort to make you clear regarding this. I have taken the Nepal Rastra Bank (central bank ) as a core basis for understanding.

First of all the meaning of counterfeit coin must be understood.

 Actually, 'Counterfeit coin' means:

• Duplicate coin minted copying the coin issued by the Bank or 

• Counterfeit coin or 

• The Coin prepared by melting or manipulating or 

• The coin prepared by cutting and breaking into two or more places or 

• The coin whose figures, letters and signs have been defaced. 

The central bank

• Withdraws or

• Destroys or 

• Replaces 

- the soiled currency with other banknote or coin.


It is to be understood that, 

the central bank has the power to deny in replacement of the banknote or coin,
The design of which has been deleted, or

which is:

• Torn or

• Defaced or 

• destroyed more than 50% of its portion 

Such withdrawal or destruction of banknotes can be done with or without compensating to the owner of the banknotes or coins.


No owner of the lost or stolen banknotes or coins is reimbursed from the Bank. The Bank can forfeit without any compensation for- the coins or notes, the outer appearance of which is changed, or which is counterfeit coins or fake note.

Provisions Relating to Currency Inventory and Issuance of Currency: 

The Nepal Rastra Bank carries out all the function which is related to currency inventory and issue of currency. The bank regularly supplies the banknotes or coins in order to meet the demand of currency.


Account of Issued Currency:


The Bank maintains the account of the entire banknotes and coins in circulation showing them separately as monetary liability. It must be noted that, such liability don't includes the bank notes and coins in stock or not in circulation.

Currency Recall:

The central bank of Nepal can recall the bank notes and coins which are in circulation within Nepal. This is done through exchange of other bank notes and coins in equivalent amount. 

Similarly, the bank publishes and transmits pubic notice by :

• Clearly specifying the period during which the bank notes or coins must be presented for exchange 

• Where they are to be so presented. 

It must be noted that, when the prescribed time limit given by Nepal Rastra Bank is expired then the bank notes and coins which are to be exchanged will cease to be a legal tender.

For the banknotes and coins which are withdrawn from circulation,and for the currency with defect, the central bank has power to :

• Cut 

• Break 

• Demolish

• Destroy 

- in any manner as prescribed.

Reproduction and Counterfeiting of Currency:

It must be kept into our mind that following activities should not be committed by any persons:-

• To forge, counterfeit or alter banknotes and coin which are in circulation as legal tender in the Nepal. 

• To forge, counterfeit or alter any cheques. 

• To forge, counterfeit or alter any payment card. 

• To possess, transport or issue any banknote or coin or cheque or payment card with the knowledge that such banknote or coin, cheque or payment card was falsely made, forged, counterfeited or altered. 

• To possess, transport any sheet of metal, stone, paper, die or any other material or substance with the knowledge that it was done to be used in - falsely making, forging, counterfeiting or altering any banknote or coin, cheque or payment card. 

• To assist (help) in any of the above activities in any manner. 

NOTE:

Unless a prior written authorization is taken by Nepal Rastra Bank following things should not be done :

• Reproduction of any banknotes, coins, cheques, securities or payment cards, denominated in Rupee 

• Creation of any objects that simply imitate any such banknote, coin, check, security or payment card by their design. 

However, Nepal Rastra Bank strictly takes appropriate legal actions in order to prevent the issue of fake notes or counterfeit currency or duplicate cheque or payment. The Bank keeps upon issuing of necessary order, directives or notices regarding such actions.








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