KATHMANDU - Nepal's central bank, Nepal Rastra Bank (NRB) inked the memorandum of understanding (MoU) with its Chinese counterpart, People's Bank of China on Friday, according to which NRB shall invest in the securities issued by Chinese government.

Visiting deputy governor of PBOC, Hu Xiaolian and deputy governor of NRB, Gopal Kaphle signed an MoU titled "Agency Agreement on Investment in Interbank Bond Markets of China" at a function organized in Nepal Rastra Bank, Bhaskarmani Gynwali, spokesperson of NRB told Xinhua.

"NRB, with an aim to diversify its investment on foreign exchange reserve has signed the MoU with PBOC and this is the beginning of Nepal-China banking relations at a new level," Governor Yubaraj Khatiwada said in the function.

In a one-to-one meeting with deputy governor of PBOC, Governor Yubaraj Khatiwada urged China to expand banking facility between Nepal and China besides formalizing the trade via payment through banking channels.

He pointed out the needs of currency swap arrangement between China and Nepal to facilitate trade relations.

After the MoU signed on Friday, NRB will now open an account on Chinese currency in PBOC through which it will invest in Chinese debentures, treasury bills, bonds and other governmental securities.

NRB has been investing in different currencies to manage its portfolio on foreign exchange reserve.

The board meeting of NRB in February 2013 had decided to put its investment in the Chinese government guaranteed securities.

NRB in the coming days will also hold meetings with Chinese counterpart for the settlement of trading in Yuan which is now often settled in U.S. dollars, spokesperson Gynwali said.