Banks and Financial Institutions Act No. 10


(enacted in 2006)

The Banks and Financial Institutions Act No. 10 of 2006 serves to consolidate and amend legislation relating to banks and financial institutions in Nepal. More specifically, it replaces the Development Bank Act of 1996, Nepal Industrial Development Corporation Act of 1990, Finance Company Act of 1985, Commercial Bank Act of 1984, and Agricultural Development Bank Act of 1967. The act addresses all financial institutions and classifies them into categories on the basis of minimum paid-up capital required for a license to be issued by the Nepal Rastra Bank. Class A includes commercial banks, class B includes development banks, class C consists of finance companies, and class D consists of microfinance development banks (MFDBs).

This act consists of twelve chapters, which include the following:

  • Chapter 1 Preliminary: defines language in the act;
  • Chapter 2 Provisions relating to Incorporation of Banks, Financial Institutions, or Securities;
  • Chapter 3 Provisions concerning Board of Directors and Chief of Banks or Financial Institutions;
  • Chapter 4 Provisions relating to License;
  • Chapter 5 Provisions relating to Capital;
  • Chapter 6 Provisions relating to Operation of Financial Transactions;
  • Chapter 7 Regulation, Inspection, and Supervision;
  • Chapter 8 Provisions relating to Supply and Recovery of Credits;
  • Chapter 9 Provisions relating to Accounts, Records, Returns, and Reports;
  • Chapter 10 Provisions relating to Merger of Licensed Institutions;
  • Chapter 11 Provisions relating to Offenses and Punishment; and
  • Chapter 12 Miscellaneous: addresses liquidation, arbitration and mediation, bylaws, and other related matters.