Kathmandu – Nepal Rastra Bank has implemented the Swap Transactions Regulations, 2081. The Central Bank has promulgated this Regulation in exercise of the powers conferred by Section 12 of the Foreign Regulation (Regulation) Act, 2019. The Central Bank has now instructed banks and financial institutions (counterparties) to conduct swap transactions with the National Bank in accordance with the same regulation. This regulation was approved by the Board of Directors meeting held on 4th July last.

Now, for the purpose of managing foreign exchange risk, ‘Buy-Sell US Dollar/Nepali Rupee Swap’ transaction can be done between Rashtra Bank and counterparty. In the first phase of the swap transaction, the Rastra Bank will buy US dollars and sell Nepalese rupees at the spot rate set by the counterparty.

Similarly, in the second phase of the swap transaction, the provision is made in the regulations that the National Bank will purchase Nepali Rupees from the counterparty by selling the amount of US dollars equal to the first phase on the specified forward date and at the specified rate. The US dollar amount, spot rate, first stage trade rough date, forward date and second stage trade rough date will be determined on the same date of the swap transaction.

The committee will decide on the amount of the swap transaction, the date of the swap transaction, etc. The spot rate of the swap transaction will be the exchange rate between the US dollar and the Nepalese rupee as per Section 8 of the Nepal Rastra Bank Foreign Currency Purchase and Sale and Market Intervention Guidelines, 2078.

Banks and financial institutions and infrastructure development banks of categories A, B, C and D licensed to bring loans from abroad in foreign currencies other than Indian rupees in accordance with Nepal Rastra Bank Foreign Investment and Foreign Credit Management Regulations, 2078 (with amendments) for swap transactions to be carried out in accordance with this regulation will be eligible. Swap transactions will be done in US Dollars and Nepali Rupees as per the regulations.

If the counterparty approved for the swap transaction deposits the US dollar amount sold in the first phase of the swap transaction in accordance with the swap transaction without depositing it to the agency account of the Rashtra Bank on the Rafsaf date, the rate received by the Rashtra Bank from the Federal Reserve Bank in the Repurchase Agreement Pool for the days of the delay. It has been mentioned that a fine amount equal to US dollars will be imposed based on the number of days. However, such fine shall not be less than USD 100.