NRB warns money changers of nixing license

Nepal Rastra Bank (NRB) has warned of cancelling the licenses of 100 companies involved in foreign exchange transactions for failing to show their paid up capital status and not serving customers as per the Foreign Exchange Regulation Act. The central bank warned the money changer companies, cargo companies, travel agencies and hotels and has set a deadline to fulfill their obligation on time. It found in a recent study of 200 companies involved in foreign exchange transaction that most of them do not have the amount of paid up capital that they had mentioned while registering themselves.

"We have given them a three-to-six months deadline to correct their deficiencies," said a senior NRB official. "Their licenses will be cancelled automatically if they fail to fulfil their obligation." Apart from unclear paid up capital status, the companies not displaying the exchange rate publicly, failing to ensure adequate security measures and not giving receipt while changing foreign currency have also been warned. The central bank can cancel the license as an extreme penalty, ranging from issuing warning notice if any company involved in foreign exchange transactions violates the Act.

The paid-up capital of a company is one of the main bases that the central bank considers before issuing a license to deal in foreign exchange. All companies, including banks and financial institutions are required to obtain a separate license from the central bank to conduct foreign exchange transactions. These companies given warning had shown paid up capital ranging from Rs. 1 million to Rs. 500 million on paper. Even the big hotels failed to show their paid up capital status, according to NRB officials. Banks and financial institutions examine the paid up capital of a company before loaning it money. If a company is liquidated, its liabilities are covered from the paid up capital.

The central bank's finding also indicates that many companies registered with the Office of the Company Registrar (OCR) might have no real paid up capital. OCR deputy registrar Laxman Takur said that he was unaware of the findings of the central bank. "We register the company related to foreign exchange transactions such as money changers and money transfer companies only after getting the opinion of the central bank,' he said. According to OCR, it has been registering the companies after getting clearance of paid up capital by auditors. "There is, however, no compulsion for private companies to produce evidence," said Thakur.

Source:
ekantipur