Nepal’s financial sector overhauls legislation and considers digital banking

KATHMANDU: The High-Level Coordination Committee Meeting in the financial sector has undertaken a comprehensive review of the subsidized loan program’s effectiveness. Under the leadership of Finance Minister Prakasharan Mahat, the committee is determined to enhance the efficiency of this program.

This decision comes in response to a study report from the National Bank, which revealed that loans disbursed through the subsidized loan program were often diverted towards non-productive sectors like real estate, vehicle purchases, including cars and motorcycles.

While the program was initially designed to support agriculture, livestock, self-employment for educated youth, youth projects returning from abroad, women entrepreneurs, Dalit community business development, and higher technical and vocational education, it was evident that some loans were not utilized in accordance with the intended purposes.

Furthermore, the committee has also resolved to expedite the process of amending key financial legislations, including the National Bank Act, Bank and Financial Institution Act, and Nepal Securities Board Act. Additionally, a review of the current legal framework governing the establishment of digital banks is underway.

In line with its objectives, the committee aims to streamline the operations and regulations of the financial sector, capital market, and insurance sector.

There is also a plan to implement incentive programs to encourage the formal channeling of remittances, fostering a more coordinated and effective financial landscape.