Governor Paudel questions perpetual bank licenses, urges stronger governance and competitive reforms

KATHMANDU: Nepal Rastra Bank (NRB) Governor Bishwanath Paudel has called for a critical review of Nepal’s banking license regime, suggesting that bank licenses should be issued with fixed terms instead of being perpetual.

Speaking at the Finance Committee of the Federal Parliament on Thursday, Central Bank Governor Paudel emphasized the need to ensure public accountability and institutional governance in Nepal’s banking sector, which currently safeguards over Rs. 7 trillion in public deposits.

‘Banks are not merely custodians of private wealth. The Rs. 7 trillion within the banking system is the lifeblood of our economy. It must be safeguarded with utmost responsibility,’ Paudel said. He stressed that the capital held by banks should be viewed as a public economic resource, not just private capital under institutional control.

Governor Paudel questioned the open-ended nature of banking licenses, drawing comparisons with other regulated sectors. ‘Most licenses have a fixed tenure—hydropower licenses expire in 30 years, telecom licenses too are time-bound. But banking licenses last indefinitely, raising concerns about stagnation in competition and entry barriers,’ he said. ‘If licenses are to remain perpetual, then barriers to entry must be significantly reduced. Otherwise, we must reconsider the validity term of banking licenses.’

In his remarks, Paudel strongly advocated for improving institutional governance, stating, “It is time banks practice ruthless integrity in corporate governance.” He further added that access to credit is not a privilege, but a fundamental right of the people, and banks must institutionalize this by supporting individuals and businesses with strong entrepreneurial ideas and bankable projects.

Reinforcing the importance of inclusive financing, the Governor stated, “Credit from banks must be treated as an entitlement of the public, not a favor. If someone comes with a viable project, they deserve the right to access financing.”

Paudel also reiterated that the regulatory provisions in the Bank and Financial Institution Act (BAFIA) were framed in line with international best practices. While the NRB remains open to dialogue on reforms, he emphasized that ultimate legislative authority rests with the Parliament.

The Governor’s statement comes at a time when Nepal’s financial sector faces growing concerns about monopolistic behavior, limited competition, and barriers to market entry. His remarks are being viewed as a policy-level push for banking sector reform, aligning with broader goals of transparency, accountability, and financial democratization.

The Finance Committee session also witnessed discussions on NRB’s evolving regulatory role, its alignment with public interest, and the need to redefine the social contract between banks and society—highlighting a shift from profit-centric operations to public-value-driven banking.

Governor Paudel’s call to revisit the licensing structure is expected to spark debate among lawmakers, regulators, and stakeholders, potentially paving the way for new policy directions in Nepal’s banking landscape. NAN