August 25-KATHMANDU: Nepal Rastra Bank (NRB), the central monetary authority, today allowed commercial and development banks to invest up to 40 per cent of the deposit
parked overseas in call deposit, certificate of deposit and other secure instruments floated by international banks and foreign governments for a period of up to two years.
Earlier, class 'A' and 'B' financial institutions were allowed to invest only 30 per cent of the money deposited in overseas bank accounts in such instruments.
At the same time, a provision introduced in the past that allows commercial and development banks to invest all of the deposit parked overseas in secure investment tools for up to a year has been kept intact.
The new facility is expected to help banking institutions of the country to invest larger portion of foreign exchange reserve abroad, which will help them in the management of excess liquidity.
Also, commercial and development banks that do not issue letters of credit, do not maintain dollar (convertible currency) accounts and are not engaged in forward trading can maintain an account of $1 million in foreign banks, says a directive issued by Nepal Rastra Bank today.
Earlier, such institutions were allowed to maintain a deposit of up to $200,000.
This money can also be invested in secure instruments floated by international banks and foreign governments.
This is expected to increase the capacity of commercial and development banks to hold convertible currency.
The directive issued by the central bank today has also permitted commercial and development banks to park up to 35 per cent of foreign exchange liabilities created by issuance of letters of credit, among others, in foreign bank accounts.
Earlier, the ceiling in this regard was fixed at 25 per cent.
Source: THT
