Kathmandu, June 12 :

The Nepal Rastra Bank (NRB), as an economic advisor to the government, has proposed that skilled Nepalis, who are capable to compete in foreign countries, should be allowed to invest abroad.

NRB, in its budget suggestions for fiscal year 2006-07 submitted to the ministry of finance (MoF) recently, has suggested the government to annul the Foreign Investment Restriction Act (FIRA) and allow Nepalis to invest abroad as some Nepalis are taking interest in that direction, informed an NRB source to The Himalayan Times.

This is the first time the central bank is suggesting the government to allow Nepalis to expand their investment sphere out of the country.

NRB, also as a monetary authority of Nepal, has been facing various problems. Nepal does not have a sophisticated capital market and growth rate is low compared to India. Against this backdrop, NRB has suggested the government to introduce ‘corporate bonds’ either from the government side or the private sector, to safely park the money for a period of at least 20 to 30 years and mobilise capital, informed a source.

“There should be a provision in the Company Act to facilitate corporate bonds to avoid

legal hurdles.”

NRB has unofficially been talking about merger and acquisitions in banks and finance companies,as they will be facing survival threats in post-WTO membership era. Apparently, it has now officially suggested to the government to create a ‘merger and acquisition act’ encouraging financial institutions to merge, enabling them to face the stiff competition from global financial institutions, says a source.

The merger and acquisition act would help these financial institutions to reduce their overhead costs and help bring down spread rates of lending and deposits, says a source.

“This will ultimately provide the economy of scales,” the source added.

Despite the existence of a tremendous investment potential for investing in tourism and hydropower, there is not a single financial institution which can alone invest in such huge infrastructure projects.

Given such a difficult scenario, NRB in its suggestions basket, has asked the government to entice large financial institutions to boost the investment climate here .