Rastra Bank Regulations on Banking Names

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Questions and Answers

Who grants approval for using the name of a bank or financial institution?

Nepal Government

Ministry of Finance

World Bank

Rastra Bank (correct)

What is the purpose of regulating the use of certain terms like 'bank' and 'finance'?

To restrict the growth of the financial sector

To increase revenue for the government

To protect consumers and prevent misuse (correct)

To promote competition in the banking sector

Which of the following entities is exempt from obtaining approval to use restricted terms?

Organizations established by law or international agreement (correct)

Private companies

Individuals

Foreign banks

What happens to entities that had prior approval before the act's commencement?

They can continue using their established names Signup and view all the answers

Why are specified naming conventions required for different classes of institutions?

To ensure clarity and standardization across the sector Signup and view all the answers

What is the purpose of the Rastra Bank's approval for using the name of a bank or financial institution?

To ensure legitimacy and prevent misuse Signup and view all the answers

Which of the following is a type of institution that must use specific terms in its name?

All of the above Signup and view all the answers

What is the time frame within which companies must apply for a banking license after incorporation?

Six months Signup and view all the answers

What is the act that regulates the use of names and terms in the banking and financial sector?

BAFIA-2073 Signup and view all the answers

What type of company must a bank or financial institution register as?

Public limited company Signup and view all the answers

Who has to register a company under Sub-Section (1)?

The official authorized under the laws in force Signup and view all the answers

What must be submitted to the Rastra Bank along with the application for prior approval?

The prescribed fee and all the required documents Signup and view all the answers

What is included in the documents to be submitted to the Rastra Bank?

All the above-mentioned documents Signup and view all the answers

Why is the evidence of statement disclosing the sources of income required?

To check the tax clearance of the applicant Signup and view all the answers

What is the condition for an applicant who has been blacklisted?

The applicant can still apply after a certain period Signup and view all the answers

What is required from an applicant who is a body corporate?

Both the audited financial statements and tax clearance certificate Signup and view all the answers

Why is the self-declaration of the applicant required?

To ensure the applicant is not involved in cheating, fraud or criminal offence Signup and view all the answers

What must be submitted by the applicant regarding their family members?

All the above-mentioned information Signup and view all the answers

What is the purpose of submitting all these documents?

To obtain prior approval from the Rastra Bank Signup and view all the answers

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.