Central Bank forms task force to recommend banking sector reforms

KATHMANDU: In a decisive move to strengthen and improve Nepal’s banking sector, the government has constituted a three-member Banking Sector Reform Suggestion Task Force. The panel will work under the leadership of Dr. Rewat Bahadur Karki as Chairperson, with Bhuban Kumar Dahal as a member, and the Executive Director of the Banking and Financial Institution Regulation Department of Nepal Rastra Bank acting as Member Secretary.

The task force has been given a strict deadline of one month to deliver actionable recommendations focusing on key challenges facing Nepal’s banking industry.

The task force’s mandate includes crafting a more liberal yet prudent banking policy framework. It will emphasize risk-based supervision and encourage the development of customer-friendly banking services that promote transparency and efficiency. This move is expected to boost confidence among depositors and investors alike.

Furthermore, the panel will explore the vital role that banks must play in sustaining the country’s economic activities, especially in the post-pandemic recovery phase. Particular attention will be given to increasing credit accessibility in rural areas, where financial inclusion remains limited.

The task force will also assess the ongoing merger and acquisition activities among banks and financial institutions, identifying challenges arising from these consolidations and suggesting effective solutions to ensure smooth transitions and sustained operational stability.

In addition, the task force will focus on the banking sector’s critical role in helping Nepal remove itself from the Financial Action Task Force (FATF) grey list. Ensuring compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations is a top priority for regulators and the government.

Lastly, the panel will evaluate the central bank’s coordinating role in developing Nepal’s capital market, aiming to foster a robust and well-regulated financial ecosystem.

This task force formation signals the government’s commitment to reforming Nepal’s banking landscape to promote financial stability, investor confidence, and economic growth. The sector’s reforms are expected to attract greater foreign investment and improve the overall business environment in Nepal.

The task force’s recommendations are eagerly awaited by industry stakeholders and international observers as Nepal strives for sustainable economic development and stronger financial governance.

The task force has been given a one-month timeframe to submit recommendations on the following key areas:

• Formulating a liberal yet prudent banking policy and regulation framework, including risk-based effective supervision and development of customer-friendly banking services.
• Defining the role the banking sector should play to keep economic activities fully operational.
• Steps to enhance effective credit flow in rural areas.
• Suggestions on the merger and acquisition of banks and financial institutions, including identifying and resolving post-merger challenges.
• The role of the banking sector in helping Nepal to be removed from the Financial Action Task Force (FATF) grey list.
• The central bank’s coordinating role in the development of the capital market.