Nepal Opens Share Market for NRNs: Investment and Fund Repatriation Now Easier in NPR

Non-Resident Nepalis (NRNs) can now invest in Nepal's capital market using Nepali Rupees (NPR), with the ability to repatriate both their investment and earnings more conveniently. Nepal Rastra Bank (NRB) has amended the "Foreign Investment and Foreign Loan Management Regulations" for the fourth time, easing the rules for NRNs to apply for shares in investment companies.

On Wednesday, the Foreign Exchange Management Department of NRB issued a notice outlining the amendments made under Section 10(a) of the Foreign Exchange Regulation Act, 2019. Under the revised provisions, NRNs are now allowed to transfer investment funds into their accounts in Nepal even before obtaining official investment approval, provided approval is acquired subsequently. This change removes a major barrier that previously restricted NRN participation.

One of the key reforms allows NRNs to open NPR-denominated bank accounts within Nepal and use those accounts to apply for IPOs. Earlier, investments had to be made in foreign currency (typically USD), and funds had to be held in foreign currency accounts. This requirement made it difficult for NRNs to participate in the Nepali capital market despite SEBON’s earlier provision allowing IPO applications in NPR.

With this reform, the path is now clear for the issuance of an NPR 8.5 billion IPO under the NRN Development Fund (NDF), which has a total paid-up capital of NPR 10 billion. The Government of Nepal holds a 5% stake in this fund. Only NRNs will be allowed to apply for this IPO.

If shares are not allotted, the refund process has also been clarified. The investor will be required to submit an application through the concerned bank or financial institution, the joint investment company, or its share registrar, in order to have the unused amount refunded to their foreign account.

Additionally, under the Foreign Investment and Technology Transfer Act, 2075 (2019), NRB has allowed tax payments related to foreign investment to be made in the name of the investor, company, or tax authority through banks without requiring further approval from NRB or the foreign investment approval body.

The amended regulation also specifies that foreign investors can open both convertible foreign currency and NPR-denominated accounts at Nepali banks and deposit investment funds into them. Both profits and repatriated investments can also be transferred from these NPR accounts.

Further, NRB has now permitted foreign investments in specialized funds such as private equity and venture capital. Returns from such funds and repatriation of earnings are also allowed as per the rates fixed by NRB.

The updated regulation has also expanded the definition of “technology transfer” to include patents, designs, trademarks, goodwill, technical knowledge, formulas, processes, licensing, and know-how. It also covers services such as IT, marketing, accounting, auditing, engineering, outsourcing, digital data processing/migration, HR outsourcing, design services, and even reverse engineering.

This amendment is expected to significantly open up the capital market for NRNs, offering them a streamlined, NPR-based investment channel while ensuring better transparency and flexibility for future returns.