NEPAL: Letters of Credit for Import of Non-Essential Goods Halted

The Nepal Rastra Bank, the country’s central bank, has advised commercial banks not to issue letters of credit for the import of luxury items, according to a Xinhua report on 5 April 2022. The Nepal Bankers’ Association said its members have subsequently suspended the opening of letters of credit for luxury items, such as private vehicles, cigarettes and alcohol, dry fruits, furniture, decorative items and cosmetic products, among others.

The move follows a tightening of LC terms introduced by the bank in December 2021, when it required commercial banks to issue letters of credit for certain luxury items only when 100% of the amount was held on deposit. Items covered included mineral water; sugar and confectioneries; energy drinks; alcoholic beverages; vinegar; cloves; perfumes; cigarette and tobacco products; cosmetics; wooden items, cement, footwear, gold and silver, ceramic items, umbrellas and marble. Imports of automobiles and motorcycles were required to maintain 50% of their cost on deposit.