Nepal Rastra Bank regulation on bank guarantee charges refers to the regulatory framework issued by Nepal Rastra Bank that governs how licensed banks and financial institutions in Nepal may levy fees, commissions, and related costs for issuing bank guarantees. These regulations ensure transparency, uniformity, and consumer protection within Nepal’s banking system.
Bank guarantees are a core risk-mitigation instrument in Nepal’s commercial, infrastructure, import–export, and public procurement sectors. Without regulatory oversight, guarantee charges could vary arbitrarily, increasing costs for businesses and distorting competition.
Nepal Rastra Bank (NRB), as the central monetary authority, regulates guarantee-related charges to:
Maintain pricing discipline in the banking sector
Protect borrowers, contractors, and importers from excessive fees
Ensure risk-based but fair pricing aligned with prudential norms
Support financial stability and contract enforcement
For contractors bidding on government projects, importers posting customs guarantees, or companies providing performance security, understanding NRB’s rules on guarantee charges is not optional—it is a compliance requirement.
NRB does not regulate bank guarantee charges through a single standalone regulation. Instead, control is exercised through a combination of binding directives, unified circulars, and prudential guidelines, including:
NRB Unified Directives to Banks and Financial Institutions (BFIs)
Periodic NRB Circulars and Notices
Risk-based capital and credit exposure guidelines
Consumer protection and transparency provisions
Sector-specific instructions (e.g., public procurement, customs, foreign exchange)
Together, these instruments define what banks may charge, how charges must be disclosed, and what practices are prohibited.
A bank guarantee is a written undertaking issued by a licensed bank, on behalf of a customer, to pay a specified amount to a beneficiary if the customer fails to fulfill a contractual or legal obligation.
Purpose
Secures contractual performance
Mitigates counterparty risk
Replaces cash deposits or collateral
Scope
Government contracts
Customs and tax obligations
Import–export transactions
Corporate and infrastructure projects
Practical Use
Bid security guarantees
Performance guarantees
Advance payment guarantees
Customs and statutory guarantees
NRB regulates guarantee charges through principle-based controls, not rigid price fixing.
Banks must ensure that:
Charges are reasonable and risk-based
Pricing policies are board-approved
Fees are uniformly applied to similar customers
All charges are fully disclosed upfront
No hidden or unauthorized fees are imposed
Banks may not:
Levy arbitrary or discriminatory charges
Alter charges mid-tenure without contractual basis
Bundle unrelated fees into guarantee pricing
Circumvent disclosure requirements
Under NRB supervision, guarantee-related charges generally fall into the following categories:
Primary recurring charge
Usually calculated as a percentage per annum
Charged quarterly, half-yearly, or annually
One-time upfront fee
Covers documentation and administrative costs
Applicable when guarantee validity is extended
Priced proportionally to extension period
For changes in amount, beneficiary, or terms
Regulated to prevent excessive penalization
NRB requires these charges to be clearly itemized, not aggregated.
To issue a bank guarantee under NRB-regulated conditions, a customer must generally meet the following criteria:
Valid account relationship with the bank
Satisfactory creditworthiness and risk rating
Adequate collateral or margin as per bank policy
Compliance with KYC and AML requirements
Purpose aligned with lawful and permitted activities
Banks must document eligibility assessment as part of internal audit and NRB inspection readiness.
Typical documentation required under NRB-compliant practices includes:
Formal application for bank guarantee
Underlying contract or work order
Bid documents or procurement notice (for bid guarantees)
Board resolution (for corporate clients)
Financial statements and cash flow projections
Collateral or margin documentation
KYC documents and tax registration
Assuming guarantee charges are negotiable post-issuance
Ignoring renewal cost implications
Overlooking amendment fees
Failing to confirm NRB-compliant disclosure in sanction letters
Application Submission
Customer submits guarantee request with supporting documents.
Credit & Risk Assessment
Bank evaluates exposure, collateral, and risk category.
Approval & Pricing Determination
Charges set as per board-approved NRB-compliant policy.
Disclosure & Acceptance
Customer receives full breakdown of guarantee charges.
Guarantee Issuance
Bank issues guarantee instrument to beneficiary.
Ongoing Monitoring
Bank monitors exposure until expiry or discharge.
NRB does not prescribe fixed bank guarantee rates. Instead, banks determine charges within NRB-approved policies, typically ranging from 0.25% to 3.00% per annum, depending on risk, tenure, and collateral.
| Charge Type | Typical Range |
|---|---|
| Guarantee Commission | 0.25% – 3.00% p.a. |
| Issuance / Processing Fee | NPR 500 – NPR 5,000 |
| Renewal Fee | Pro-rata commission |
| Amendment Fee | NPR 500 – NPR 2,000 |
| Margin Requirement | 0% – 100% (risk-based) |
Charges vary by bank policy, risk profile, and NRB directives in force.
| Stage | Estimated Time |
|---|---|
| Application & Review | 1–3 working days |
| Credit Approval | 2–5 working days |
| Issuance | Same day after approval |
| Total Estimated Time | 3–7 working days |
Under NRB-regulated practices:
Guarantees are time-bound
Expiry date must be clearly stated
Automatic renewal is not permitted without consent
Extensions require fresh approval and revised charges
Discharge or release must be documented
Failure to manage validity properly may lead to unnecessary renewal charges or blocked credit limits.
Banks and customers must adhere to the following:
Charges must remain transparent and documented
Customers should monitor expiry and renewal timelines
Banks must maintain adequate capital coverage
Internal audits must review guarantee pricing compliance
Disputes must follow NRB-mandated grievance mechanisms
To ensure compliance with NRB regulation on bank guarantee charges:
Review the bank’s schedule of charges
Cross-check the sanction letter
Confirm alignment with NRB Unified Directives
Request written clarification for any additional fee
Use NRB’s consumer complaint channels if needed
These steps are critical for contractors, importers, and corporates managing large guarantees.
No. NRB does not fix exact rates. It requires banks to charge within board-approved, transparent, and risk-based frameworks that comply with NRB directives.
No, except contractually allowed cases. Charges cannot be altered mid-tenure unless clearly provided in the agreement and disclosed upfront.
Yes, indirectly. NRB allows risk-based margins, but excessive or arbitrary margins may attract supervisory scrutiny.
No. Guarantee commissions and processing fees are generally non-refundable once the guarantee is issued.
Yes. Customers may first approach the bank and then escalate to NRB if charges violate disclosure or fairness rules.
Yes. All NRB-licensed banks and financial institutions must comply with NRB regulations on guarantee charges.
Nepal Rastra Bank regulation on bank guarantee charges in Nepal ensures that guarantee pricing remains transparent, fair, and aligned with risk-based banking principles. For businesses, understanding these rules reduces cost uncertainty and strengthens financial planning. For banks, compliance is not optional—it is a core supervisory obligation.
This article is for general informational purposes only and does not constitute legal or financial advice. NRB directives and bank policies may change over time. Readers should consult the relevant bank or professional advisors for transaction-specific guidance.
February 03, 2026 - BY Admin