NBSM Newsletter, August 2015 Volume 1

Transcription

1 NBSM Newsletter, August 2015 Volume 1

2 In this Issue: I. BANKING REFORMS IN NEPAL II. III. IV. PROVISIONS FOR WATCHLIST- NRB CHANGING TIME CHANGING AUDIT APPROACH TAX FACT INCOME FROM EMPLOYMENT V. QUICK FACT : WHY INVEST IN NEPAL? NBSM Newsletter, August 2015 Page 2

3 BANKING REFORMS IN NEPAL Some Milestones in Banking Sectors Reforms Modern Banking History of Nepal has passed 78 years. REFORM DESCRIPTION Establishment of Nepal Bank Ltd. The first Commercial Bank in Nepal. Marked as the beginning of the development of Nepalese financial System. Establishment of Nepal Rastra Bank Till that time, there was no any Central Bank in Nepal. The responsibility of central bank was carried by Nepal Bank Ltd. New Era of Banking Regulation begin. Nepal Rastra Bank removed the Entry Barrier to private & foreign investment In banking Sector. Establishment of 1st joint venture Bank in Nepal, It was Nepal Arab Bank Ltd. Known now as Nabil Bank. Also in this period there was deregulation in interest rates. Reforms in Treasury bills Issuance. In this period NRB also introduced Prudential Norms. Establishment of Credit Information Bureau. Credit Information Bureau provides the information of black listed People i.e. loan defaulter. Also shift in Monetary policy stance. Introduce Credit Cards in Nepal. In this period Nabil bank introduced credit cards for the first time in Nepal. NBSM Newsletter, August 2015 Page 3

4 BANKING REFORMS IN NEPAL Contd.. Some Milestones in Banking Sectors Reforms Modern Banking History of Nepal has passed 78 years. REFORM DESCRIPTION Strengthening of Government owned Commercial Banks. Government owned Commercial Banks were managed tightly in the System. Introduction in Reserve Requirement. In this period with the reduction of Reserve requirement NRB also granted permission to conduct limited banking transactions to micro credit & co-operatives. Enactment of Development Bank Act. In this period act for Development Bank was enacted by NRB. Since then Development Bank incorporated. Limited Banking to transaction to NGO'S. NRB granted permission to conduct the limited banking transaction to NGO's. Enactment of NRB Act In this period Nepal Rastra Bank enacted NRB act 2002, restructuring of government owned commercial bank along with enactment of Debt Recovery Act. Also for the first time Internet banking in Nepal was introduce by Kumari Bank Limited. Enactment of BAFIA In this period Bank and Financial Institution Act i.e. BAFIA was enacted. Stoppage in issuance license of BFI's Till this time numbers of the bank & financial institutions were raised dramatically so NRB temporary stopped the issue of license for new bank and financial instructions In this period another important law was issued i.e. merger by laws Change in Capital Requirement. New monetary policy was issued which changed the Capital Structure of banks. Compiled By : Ashok Gautam NBSM Newsletter, August 2015 Page 4

5 PROVISIONS FOR WATCHLIST- NRB According to New NRB Directives, the Banks and financial institutions (BFIs) has to make provisioning of five percent of the loan category of watch list gradually over the next two years until Poush End 2073 as follows: S.N Time limit % of provision 1 Up to Chaitra End % 2 Up to Ashad End % 3 Up to Ashoj End % 4 Up to Poush End % 5 Up to Chaitra End % 6 Up to Ashad End % 7 Up to Ashoj End % 8 Up to Poush End % The central bank added watch list as the new category of loan to discourage growing practice of borrowers not utilizing the loans in projects where they were supposed to go. In fact, the central bank found some sugar mills were not utilizing loans taken from banks for the purpose of the mill operation and they were also not paying sugarcane farmers. The NRB suspected the borrowers might have siphoned off the money from the country. The central bank has also revised the criteria of the watch list. The criteria for watch list are listed below: 1. Any loan that has crossed the repayment deadline by one to three months. 2. Short-term loans and operating loans whose deadline has been extended temporarily without renewal. 3. BFIS have to categorize the loans extended to a borrower whose loans from another bank have turned nonperforming as watch list. 4. Loans provided to a firm whose net worth and cash flow have remained negative for the past two years despite regular payment of principal and interest. Compiled By : CA. Binod Phuyal NBSM Newsletter, August 2015 Page 5

6 CHANGING TIME CHANGING AUDIT APPROACH We ve reeked into the 21st Century, and if there are to be named two big terms of this era they will undoubtedly be Finance and Technology. The world today is witnessing a growing number of professionals, with every generation outsmarting the previous one. In such a complex environment, where competition literally kills, unfair means and practices are found to be fair to most. The newer, smarter and complex techniques of fraud and compromised ethics pose a challenging task to the watchdog s profession. Can audit today, be the same as it was? Definitely not! Technology may have made the most tedious audit tasks easier, but at the same time it makes concealment of material facts simpler. Today, auditors cannot just do away with traditional techniques of auditing that may be called as the book rules. With increased regulatory focus and widespread negative impact of frauds, the managements and senior executives of most corporates are increasingly paranoid about the vulnerability and exposure of their businesses/organizations to frauds and whether or not they are adequately protected. A recent survey conducted internationally for Fraud in Banks indicated that more than half the frauds were detected by audit reviews. This brings into focus the role of audit in fraud risk management. Written By : Saroj Ghimire As the mandate and role of audit continue to evolve, managements are increasingly counting on audit functions in their efforts for managing fraud risks and keeping organizations protected. Increasingly, the audit function is not to monitor and detect but also to investigate fraud incidences when they arise. The role of audit in fraud risk management by way of preventing, detecting and investigating fraud has amplified as a result of economic uncertainty and increased focus of certain organization s management on fraud risks. It is, therefore, vital to gain a firm understanding of the nature of business of diverse clientele, study the major risks of each client and modify the approach towards the audit accordingly. Key emphasis is to be laid on conducting a rigorous analytical review, and a detailed comparative study of the concern s financial figures. A good audit today has a much broader perspective, including a fine knowledge of off-balance sheet events that could possibly reveal the existence of misstatements and intended concealments in the financial domain. NBSM Newsletter, August 2015 Page 6

7 TAX FACT INCOME FROM EMPLOYMENT Income from Employment for an Income Year of an individual s forms the remuneration paid to that Individual in that Income year. As per Income Tax Act of Nepal, following payments made to the Individual by the employer during the year are included in the Taxable Income from Employment: a. payments of wages, salary, leave pay, overtime pay, fees, commissions, prizes, gifts, bonuses, and other facilities; b. payments of any personal allowance, including any cost of living, subsistence, rent, entertainment, and transportation allowance; c. payments providing any discharge or reimbursement of costs incurred by the individual or an associate of the individual; d. payments for the individual's agreement to any conditions of the employment; e. payments for redundancy or loss or termination of the employment; f. retirement contributions, including those paid by the employer to a retirement fund in respect of the employee, and retirement payments; g. other payments made in respect of the employment. Compiled By : Bibek Poudel However, the following are excluded in calculating an individual's remuneration from an employment: a. amounts exempt under Section 10 of Income Tax Act, and final withholding payments; b. meals or refreshments provided in premises operated by or on behalf of an employer to the employer's employees that are available to all the employees on similar terms; c. any discharge or reimbursement of costs incurred by the individuali. that serve the proper business purposes of the employer; or ii. that are or would otherwise be deductible in calculating the individual's income from any business or investment; d. payments of the prescribed small amounts which are so small and thus unreasonable or administratively impracticable to make accounting for them. The employee is not required to file Income Tax return when he has only one Employer at a time and Employer is Resident and has claimed only such retirement benefit being paid by the employer and has claimed the payment for medical treatment made by Employer but has not claimed donation expenses. In all other cases, return should be filed. NBSM Newsletter, August 2015 Page 7

8 QUICK FACT : WHY INVEST IN NEPAL? WHY INVEST IN NEPAL? Nepal Government is liberal on Foreign Investment and allows 100% foreign ownership in most of the sectors of economy. The investment rules and procedures of Nepal are simple and easy. The tax rates are relatively low (lowest in South Asia) The Export and Import Rules and procedures are open and liberal. Low labor costs and an Increasingly Literate Population gives global companies based in Nepal a competitive edge in the global market. About 63 minerals have been identified in Nepal so far ( ) and the Himalayas are expected to have large reserves of limestone, talc and other industrial/construction minerals. The strategic location of Nepal not only offers unparalleled and preferential access to the China and India markets for bilateral trade and investments, but also provides the potential of Nepal acting as a transit hub which could facilitate increased trade in the future. Nepal lies at a GMT time zone of +5:45, giving European and American countries the potential to have a 24 hour work schedule which can be vital in today's world of business and connectivity. Involvement in various multi and regional forums has provided Nepal with free and preferential access to international market. Yet many sectors are not explored giving vast opportunity to the investors to invest in. Nepal s Population Density is very high making it world s 41 st most populous country. Written By : Editorial Team NBSM Newsletter, August 2015 Page 8

9 For Further Correspondence: NBSM & Associates, Chartered Accountants (Independent Member of GGI-Geneva Group International) 6 th Floor, Block A, Four Square Complex, Narayan Chaur, Naxal, Kathmandu, Nepal Head Office : Phone: , Mobile: nil.saru@nbsm.com.np, Website : Branch Office : NBSM Consulting Pvt. Ltd, Butwal, Rupandehi, Nepal Phone : Mobile : Disclaimer: The information contained in this document is compiled by NBSM & Associates and is exclusively for the information of its clients and staffs. However the detail study is recommended before taking any decisions on the matters contained herein. NBSM Newsletter, August 2015 Page 9

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