2.3.

Legal Provision relating to Corporate Social Responsibility for

Companies: Industries and Bank and Financial Institutions
This paper will try to look upon the relevant legal provision related to CSR, and
they are as follows:

The companies Act of Nepal has not explicitly mentioned about the CSR in its
provisions. If we look at CSR from more liberal and voluntary perspective, then
Companies from the beginning of their incorporation are required be in the legal
and social standard, which is a most for the company's existentialism.

Though, Bank and Financial Institution Act, 2073 and Nepal Rastra Bank Act,
2058 doesn't mention about the CSR, Nepal Rastra Bank has issued a Circular on
CSR for bank and financial institution.1 The requirements set up by NRB are as
follows:

 Bank and Financial Institutions are required to allocate at least 1% of their

net profit and it requires them to deposit the same in a separate CSR fund,
and the fund allocated is to be utilized in the subsequent fiscal year. But, it
has not clarified whether allocation is to be done prior or subsequent to
profit.
 It has also specified areas for the CSR activities to be done by the banks and
financial institutions i.e. Firstly in the area for Social projects like health,
environment protection, cultural promotion, consumer protection, etc,
Secondly, Direct grant expenditure like expenditure for social cause and
lastly for achieving Sustainable development goals.2
 The circular has imposed limitation on use for marketing purpose and also
imposed sanction for non compliance NRB has provided punishment for
those banks and financial institution for not complying with NRB
circulars.3And bank and financial Institution are required to bear the cost of
setting up a child day care centre for their employees.
1
Available at https://www.nrb.org.np/bfr/bfrcirculars.php?tp=2073-74&&vw=15 Accessed on 19 March, 2020[ The
circular was issued by NRB on 2073/10/12 and the circular no. is 11/073/74
2
Available at http://www.pioneerlaw.com/news/existing-laws-on-corporate-social-responsibility , accessed on 19
March, 2020
3
Available at http://www.pioneerlaw.com/news/existing-laws-on-corporate-social-responsibility , accessed on 19
March, 2020[The circular have restricted banks and financial institutional to utilize the fund for branding purpose or
personal or political purpose except that it is used for reference purpose.] Also see Nepal Rastra Bank, 2002, chapter
11
Whereas, CRS requirement for industries is governed by Industrial Enterprises
Act, 2073 and the requirements are as follows:

 "Firstly, the CSR has been only made mandatory to certain industries i.e. on
the basis of investment in fixed capital and the annual turnover. So,
i. Large industries having investment in fixed capital exceeding of NPR
250,000,000 and
ii. Medium industries having investment in fixed capital exceeding NPR
100,000,000 but less than NPR 250,000,000
iii. Cottage and small industries having investment in fixed capital of less
than NPR 100,000,000 and requirement of annual turnover is more
than NPR 150,000,000."4

4
Industrial Enterprise Act, 2016, chapter 9, section 48[1]