• Nepal Banking Industry

Nepal Banking Industry (Photo : Getty Images)

According to a senior official of the Nepal Rastra Bank (NRB), Nepal is welcoming the presence of branches of Chinese banks in the country irrespective of their size in China, as long as they meet the criteria set by the central bank.

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High-ranking officials of the central bank had a recent discussion on whether or not the country will allow smaller Chinese financial institutions to open branches.

On Sunday, the officials have announced their decision as reported by the state-run Xinhua News Agency.

“We reached a conclusion that the presence of Chinese banks has been necessary in the country and we should welcome branches of Chinese banks irrespective of their size in China,” the deputy governor of the NRB Chintamani Siwakoti said.

According to Siwakoti, the Nepalese central bank is still to accept any official proposal from any Chinese bank notwithstanding the tighter regulations from the Chinese side.

Foreign banks and financial institutions can come into the banking sector of Nepal in two ways: through a partnership with Nepalese investors under a joint venture deal or through opening their own exclusive branches.

The Nepalese law permits foreign banks and financial institutions to have a maximum of 80 percent of stake in joint venture banks. The law also permits joint venture banks to offer all types of banking services in the country.

However, foreign banks that opt to open their exclusive branches in the country are obliged to allocate a minimum capital of $20 million. These banks also have a limited scope of banking services to offer as the law prohibits them from retail banking.

“Once the Chinese banks' branches are opened in Nepal, the transactions of goods in Chinese yuan will rise and it will also save cost of carrying U.S. dollar to China for Nepalese traders,” Nepal Trans-Himalaya Border Commerce Association President Bishnu Bahadur Khatri.

The association is engaged in trade with China.

Nepal becomes a potential market to Chinese banks as the NRB welcomes their presence in the country.