New provision for foregin currency payments

KATHMANDU, Aug 23:

Any Nepali firm, company or organization that cannot produce regulatory recommendation to get foreign exchange services to make payment for services worth above US$ 50,000 will now have to get pre-approval from Nepal Rastra Bank (NRB) before seeking services from foreign firms.

Issuing a notice on Sunday, the NRB -- the central regulatory bank -- said that that such pre-approval will be a must for domestic firms, who cannot get recommendation letter from the regulatory body to receive foreign exchange service from the central bank, while making payment in US dollar for services taken from foreign firms.

The central bank has expected that the newly introduced process will make it easier for domestic firms to make payment to foreign firms.

"It has been one of the biggest problems for domestic firms particularly those who do not have the regulatory body or cannot get recommendation letter. They make agreement first and receive the service. Later, it would become difficult to make payment as the central bank seeks recommendation from the regulatory body to provide foreign exchange," Bhisma Raj Dhungana, executive director of Nepal Rastra Bank, told Republica. "The new provision will make it easier for such firms to get foreign exchange services if they take pre-approval from the central bank before signing contract with international firms."

Those who can get regulatory approval or recommendation, however, will not be required to get pre-approval from the NRB, according to the notice.

According to NRB officials, Nepal has been getting services from foreign firms mainly in installation of technology and equipment and their repairing and maintenance, reinsurance, and expert and consultancy services, among others. According to the data of NRB under Balance of Payment heading, the country imported services worth Rs 121.67 billion in the last fiscal year.

While domestic firms that need to pay up to $10,000 can get foreign exchange service from bank or financial institutions (BFIs) upon producing necessary documents, they have to get regulatory approval or recommendation before signing contract or making payment on foreign currency above $10,000 for undertaking services.

However, firms, which cannot get recommendations from regulatory body for foreign exchange up to $50,000, can get such facility by informing the central bank that they can't produce such recommendations from Department of Industry or Office of Company Registrar.

Source: Republica