Finance Minister Paudel rejects BAFIA rewriting amid lawmaker pressure

KATHMANDU: Finance Minister Bishnu Paudel has strongly objected to delays in finalizing the amendment to the Bank and Financial Institutions Act (BAFIA), 2073, accusing the parliamentary Finance Committee of dragging the process under the pretext of rewriting the bill rather than holding meaningful clause-wise deliberations.

Speaking during the Finance Committee’s meeting on Friday, Minister Paudel stated that both the Ministry of Finance and Nepal Rastra Bank (NRB) are fully prepared to provide necessary explanations and feedback on the amendment bill, which has been under discussion for over a year. “Let’s not prolong it further. We are not asking to pass it without debate, but let’s discuss thoroughly and conclude it promptly,” Paudel urged.

The bill, registered in the House of Representatives on Chaitra 5, 2080 BS (March 18, 2024), is yet to move beyond preliminary discussions. The committee has only held theoretical consultations with ministry officials, NRB representatives, experts, and stakeholders, without proceeding to a clause-by-clause review. Meanwhile, calls for rewriting the bill have emerged, prompting frustration from the Finance Ministry.

Minister Paudel previously responded in writing on Jestha 28 (June 10), clearly stating:

“There is no need to rewrite the bill to amend BAFIA, 2073. The Ministry and NRB are firm on their position, and the same has been communicated to the Committee.”

Despite this clarity, several committee members continue to demand a rewrite, ignoring the government’s position and stalling progress. The committee had sent a formal letter on Jestha 22 (June 4), asking the ministry to clarify the contentious clauses and details of the proposed changes.

A total of 127 amendment proposals from 28 lawmakers have been submitted, with fierce debate focused on the definitions of “significant ownership” and “related persons.” The government and NRB have proposed lowering the threshold for significant ownership from 2% to 1%, and banning those with significant or affiliated shareholding from receiving loans from the same financial institution.

Some lawmakers oppose this move, arguing that bankers and businesspeople should not be legally separated, and have thus demanded a rewrite. Powerful interest groups, including banking associations and bank directors, have already lobbied against separating bankers and business owners. However, economic experts have sided with the NRB and government, recommending clearer separation to ensure effective regulatory oversight.

During Friday’s meeting, Independent MP Amresh Kumar Singh demanded a more concrete definition of “related persons” to address insider influence in loan disbursement. He also emphasized the need to curb manipulative collateral evaluations.

JSP MP Upendra Yadav slammed the current banking system, arguing it serves only a few elite families and excludes the general public, giving rise to loan sharks and mismanaged cooperatives. “Banking is now captured by 1–2 business houses, who lend to each other. The system has failed the people,” Yadav stated, calling for legal reforms to address structural inequalities.

Despite such critical discussions, the committee has not yet entered the core subject matter of the bill. Many lawmakers continue to divert meetings toward unrelated issues, wasting valuable time. On Friday, MPs from across party lines—including Surya Thapa (UML), Purna Bahadur Tamang (Nepali Congress), and Narayani Sharma (CPN-Maoist Centre)—raised off-topic remarks.

The most sensitive debate revolves around whether to legally distinguish between bankers and businesspeople, as proposed by the bill. While the government seeks to regulate significant shareholders and restrict them from borrowing from their own banks, some MPs argue this may discourage investment.

Finance Minister Paudel reiterated that the government is committed to strengthening financial regulation, ensuring transparency, and preventing conflicts of interest in Nepal’s banking sector.

“We will formally present our stance during detailed discussions. The government believes financial institutions must be regulated effectively, and we support the 1% significant ownership limit,” he asserted.

As the Finance Committee continues to stall clause-wise discussions, concerns are growing over delays in much-needed financial governance reforms. The prolonged deadlock could affect investor confidence and undermine Nepal’s banking sector accountability at a time when strong legal clarity is crucial for economic recovery and financial stability.