Foreign Capital Inflow and NRB Recording in Nepal

Foreign Investment Approval and Foreign Exchange Are Separate

DOI/IBN approval answers:

May this foreign investment be made?

NRB/banking compliance answers:

How may the foreign currency enter Nepal, be recorded and later be repatriated?

OCR answers:

How are the resulting shares/capital recorded in the company?

These systems must reconcile.

Bring Funds Through Banking Channels

FITTA requires foreign investment to be brought into Nepal through the banking system in convertible foreign currency according to NRB procedure.

For Indian investors, the statute permits the approved investment to be brought through the banking system in Indian currency under the applicable provision.

The company should avoid:

• informal cash transfer;

• personal-account routing without authority;

• unidentified third-party remittance;

• unsupported capital journal entries.

Current NRB Framework

NRB's Foreign Exchange Management Department is responsible for policy, approval/recording and repatriation of:

• foreign direct investment;

• foreign debt;

• related foreign exchange.

The Department currently lists:

Nepal Rastra Bank Foreign Investment and Foreign Loan Management Regulation, 2078 — including Fifth Amendment dated 2082/09/14

as the operative consolidated regulation.

Fifth Amendment — Important Simplification

The Fifth Amendment substantially simplified foreign-investment inflow and repatriation procedures.

Regulation 4(1) of the current Fifth-Amendment bylaw does not require separate prior NRB approval for ordinary foreign currency brought in after approval from the competent foreign-investment authority. The prescribed written information must still be provided before inflow, and the bank must verify the documents required by Schedule 3. Repatriation is governed separately by regulation 6 and its documentary conditions.

For ordinary approved equity inflow, use the current information and documentation route. Assess later repatriation separately under regulation 6; it is not governed by the inflow permission alone.

The precise transaction should instead be checked against the Fifth-Amendment procedure and authorised-bank authority.

Pre-operating / Feasibility Expenses

NRB's regulation provides a special route for bringing foreign currency through the banking system for specified:

• feasibility studies;

• company/industry registration;

• pre-operating expenses

Regulation 3 of the current Nepali Fifth-Amendment bylaw provides the feasibility and pre-operating-expense route. Its own approval, banking, cost certification, limit and recording conditions must be applied; the older English translation is background material. A receipt under this route is not automatically a refundable investment if the proposed investment does not proceed.

Because the regulation has since been amended through the Fifth Amendment, the current permitted ceiling and documentation should be checked from the latest Nepali version at transaction date rather than relying on an older translated percentage.

Capital Inflow Documentation

For an ordinary approved equity investment, maintain documents such as:

• foreign-investment approval;

• investor identification/incorporation;

• Nepal company registration;

• industry registration;

• PAN;

• approved investment amount;

• investor bank remittance;

• SWIFT/payment evidence;

• Nepal bank credit advice;

• foreign-exchange conversion certificate where relevant;

• share subscription documents;

• share allotment resolution;

• shareholder register;

• OCR/CAMIS allotment record;

• DOI/FDI record;

• NRB/bank recording documents.

The investment trail should be audit-ready from the first remittance.

Investor Name Must Match

Ideally, the foreign remittance should come from the: approved foreign investor identified in the FDI approval.

If money is remitted by:

• parent company;

• group company;

• shareholder;

• related party;

• third person,

without the approved/documented basis, later recording and repatriation can become difficult.

Any variation should be cleared under the current FDI/NRB framework before relying on the transfer.

Share Capital Recording

Receiving foreign currency is not the final step.

The company must properly convert the investment into the approved legal capital structure.

Typical flow: bank receives funds → company recognises share subscription → shares are allotted → shareholder register updated → OCR/CAMIS updated → FDI/foreign exchange recording completed.

Do not leave foreign-investment funds indefinitely recorded as:

“Share Application Money”

without completing the required corporate/FDI treatment.

Foreign Investment Recording

Regulation 5(1) requires the supported foreign-investment recording application within six months of inflow, using Schedule 6 documents and the Schedule 7 application. Regulation 5(3) provides for NRB's recording decision within seven working days after receipt of a complete application. This is separate from share allotment and the investment authority's own records.

• investor;

• FDI approval;

• approved amount;

• prior recorded investment;

• additional shares;

• inflow date;

• bank;

• foreign-currency amount;

• Nepal-rupee equivalent.

The exact current filing channel and documentary requirements should be taken from the Fifth-Amendment regulation/current bank procedure.

Why Recording Matters

Proper foreign-investment recording is important later when the investor wants to:

• receive dividend;

• sell shares;

• repatriate sale proceeds;

• repatriate liquidation proceeds;

• demonstrate legal source of capital;

• obtain further investment approvals.

An investor who can prove the investment entered Nepal legitimately has a much stronger repatriation file.

Blacklisted Company — Fifth Amendment Point

The amended Schedule 2 and Schedule 3 allow qualifying inflow to a blacklisted recipient with the prescribed disclosure, access to the blacklist report and supporting declaration. They also state that investment repatriation and foreign-loan principal or interest repayment by a blacklisted recipient are not permitted under the identified schedules while that condition applies. Approval, lawful source and other applicable requirements remain necessary.

Because this is a high-risk banking matter, any such transaction should be checked directly against the current Fifth-Amendment wording and the authorised bank before remittance. The Fifth Amendment itself is officially listed by NRB.

Share ownership changes

Current FITTA section 18क requires a DoI application for a proposed gratuitous full or partial transfer of approved foreign investment. Section 19 separately requires information about a sale or other ownership change within 30 days, with the prescribed recording and tax conditions. These are different procedures. NRB’s ordinary inflow simplification does not remove any applicable investment, company or sector permission before a transaction.

Foreign Loan Is Different From FDI

Foreign equity and foreign debt are legally different.

Equity

Creates ownership/shares.

Foreign loan

Creates repayment obligation, interest and foreign debt.

Foreign borrowing requires separate analysis under the same NRB foreign-investment/foreign-loan regulation.

Do not bring money as:

“investment”

and later attempt to repay it as:

“loan principal”

without proper approval/documentation.

Currency Conversion and Accounting

When foreign currency is received:

• bank records the foreign-currency transaction;

• the company records the Nepal-rupee equivalent according to the applicable accounting framework;

• exchange differences may subsequently arise.

The amount recognised as share capital should agree with the legally approved/allotted share capital rather than an arbitrary exchange-rate balance.

Example

Approved foreign equity: NPR 50,000,000 equivalent.

Investor remits approved foreign currency through banking channel.

The Nepal company should retain:

1. FDI approval;

2. SWIFT/remittance advice;

3. bank receipt;

4. currency conversion details;

5. share subscription;

6. Board/shareholder allotment documents;

7. shareholder register;

8. CAMIS allotment;

9. DOI/NRB/bank recording evidence.

That complete chain should later support repatriation.

Foreign Capital Inflow Checklist

• Confirm FDI approval

• Confirm approved investor

• Confirm approved amount

• Check investment schedule

• Confirm current Fifth-Amendment NRB rules

• Coordinate authorised bank

• Remit through banking system

• Preserve SWIFT/bank evidence

• Record currency conversion

• Reconcile company bank account

• Complete share subscription

• Complete allotment

• Update shareholder register

• Update OCR/CAMIS

• Complete DOI/foreign-investment recording

• Complete NRB/bank recording as currently required

• Preserve permanent FDI file

Common Errors

Bringing capital through an unrelated person's account

Treating a bank receipt alone as proof that FDI is fully recorded

Leaving foreign money indefinitely as share application money

Using an old NRB procedure that predates the Fifth Amendment

Confusing FDI with foreign loan

Failing to retain documents required for eventual repatriation

Assuming NRB simplification removes DOI/OCR requirements

Further guidance and practical checks

Foreign-investment documentation should be designed with the eventual exit and repatriation in mind. Every rupee of foreign capital should be traceable from the approved investor and banking channel to the company's share-capital and regulatory records.