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Questions and Answers
Who grants approval for using the name of a bank or financial institution?
Who grants approval for using the name of a bank or financial institution?
What is the purpose of regulating the use of certain terms like 'bank' and 'finance'?
What is the purpose of regulating the use of certain terms like 'bank' and 'finance'?
Which of the following entities is exempt from obtaining approval to use restricted terms?
Which of the following entities is exempt from obtaining approval to use restricted terms?
What happens to entities that had prior approval before the act's commencement?
What happens to entities that had prior approval before the act's commencement?
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Why are specified naming conventions required for different classes of institutions?
Why are specified naming conventions required for different classes of institutions?
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What is the purpose of the Rastra Bank's approval for using the name of a bank or financial institution?
What is the purpose of the Rastra Bank's approval for using the name of a bank or financial institution?
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Which of the following is a type of institution that must use specific terms in its name?
Which of the following is a type of institution that must use specific terms in its name?
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What is the time frame within which companies must apply for a banking license after incorporation?
What is the time frame within which companies must apply for a banking license after incorporation?
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What is the act that regulates the use of names and terms in the banking and financial sector?
What is the act that regulates the use of names and terms in the banking and financial sector?
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What type of company must a bank or financial institution register as?
What type of company must a bank or financial institution register as?
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Who has to register a company under Sub-Section (1)?
Who has to register a company under Sub-Section (1)?
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What must be submitted to the Rastra Bank along with the application for prior approval?
What must be submitted to the Rastra Bank along with the application for prior approval?
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What is included in the documents to be submitted to the Rastra Bank?
What is included in the documents to be submitted to the Rastra Bank?
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Why is the evidence of statement disclosing the sources of income required?
Why is the evidence of statement disclosing the sources of income required?
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What is the condition for an applicant who has been blacklisted?
What is the condition for an applicant who has been blacklisted?
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What is required from an applicant who is a body corporate?
What is required from an applicant who is a body corporate?
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Why is the self-declaration of the applicant required?
Why is the self-declaration of the applicant required?
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What must be submitted by the applicant regarding their family members?
What must be submitted by the applicant regarding their family members?
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What is the purpose of submitting all these documents?
What is the purpose of submitting all these documents?
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Study Notes
Use of Name of Bank or Financial Institution
- No one can use the name of a bank or financial institution to conduct banking and financial transactions without approval from the Rastra Bank.
- Certain terms like "bank", "banking", "finance", "financial", or similar are restricted and require prior approval from the Rastra Bank.
Exceptions
- Organizations established by law or international agreement are exempt from approval.
- Companies applying for a banking license within six months of incorporation are also exempt.
- Existing entities that had prior approval before the act's commencement can continue using their names.
Class Names for Institutions
- Institutions of different classes (B, C, D) must use specific terms like "development bank", "finance company", and "microfinance financial institution".
- This ensures clarity and standardization across the sector.
Rationale
- The approval requirement is to ensure legitimacy and prevent misuse, thereby protecting consumers.
- Regulating restricted terms prevents unauthorized entities from misleading the public.
Incorporation of Bank or Financial Institution
- To incorporate a bank or financial institution, it must be registered as a public limited company according to prevailing laws.
- Existing banks or financial institutions do not need to reincorporate under this Act.
Prior Approval for Incorporation
- Applying entities must submit an application to the Rastra Bank with a prescribed fee and accompanying documents.
- Required documents include:
- Memorandum and Articles of Association of the proposed bank or financial institution
- Feasibility study report
- Personal details of applicants
- Certified copy of pre-incorporation agreements
- Evidence of income sources and tax clearance
- Details on bankruptcy, loan history, and blacklisting
- Self-declaration of no criminal offences or punishments
- Information on regulatory actions against the applicant
- Family member details and significant ownership
- Details on body corporate ownership and financial statements (if applicable)
- Written authority for the Rastra Bank to conduct background inquiries
- Undertaking to guarantee/insure deposits within prescribed limits
- Other documents as specified by the Rastra Bank
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Description
Learn about the rules and restrictions on using banking and financial terms in Nepal, including approval requirements and exemptions.
