(1) Except otherwise provided in this Act, the Bank shall not provide any type of financial assistance to Government of Nepal or an institution under the full or substantial or partial ownership of Government of Nepal.
(2) Subject to the limits specified in this Section, the Bank may extend credit to Government of Nepal with a condition to repay within one hundred eighty days.
(3) Notwithstanding anything contained in Sub-section (2), the Bank may extend a special credit of long term to Government of Nepal only on account of subscription and similar payments resulting from or incidental to the membership of Nepal with international organization.
(4) The Bank shall disburse credit to be extended to Government of Nepal or an institution under full or substantial or partial ownership of Government of Nepal only in Nepalese rupees. Such credit shall be certified by negotiable debt bond issued by Government of Nepal and delivered to the Bank. Such debt security should have the maturity corresponding to the maturity of the extension of credit and should bear the interest at market rate. There must be a written agreement executed
between Government of Nepal and the Bank. Such agreement should clearly stipulate the principal amount of the loan or limit on a line of credit, the maturity, and the applicable rates of interest and other charges. Explanation: For the purpose of this Section, ” Negotiable Debt Bond” means the debt bond issued in the form of promissory note.
(5) At no time the amount of overdraft provided by the Bank to Government of Nepal shall be more than five percent of the revenue income of Government of Nepal in the proceeding fiscal year. While computing such revenue income, the amount of borrowing, grants or any other form of financial assistance or income received from the sale of property shall not be included.
(6) Government of Nepal shall make the payment of the overdraft referred to in Sub-section (5) within one hundred eighty days at the prevailing interest rate either in the form of cash or marketable debt bond.
(7) The total amount of debt bond purchased by the Bank from Government of Nepal and taken into its ownership shall not be more than ten percent of the revenue income of the proceeding fiscal year.
(8) In the following circumstances, the debt bond issued by Government of Nepal and purchased by the Bank shall not be treated as the credit extended under Sub-section (7):-
(a) If the purchase is made in the secondary market for the operation of open market consistent with the monetary policy of the Bank;
(b) If the purchase is made in the primary market, when it is necessary in the opinion of the Bank, to maintain stability in the market at the time of primary issue of such securities and such securities are divested within 60 days of purchase.
(c) The debt bond purchased by the Bank from Government of Nepal and retained in its ownership prior to the commencement of Sub-section (7).