Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal has unveiled a landmark amendment bill to reform the Nepal Rastra Bank (NRB) Act, 2002 (2058 BS), proposing sweeping changes to monetary policy, digital currency regulation, banking supervision, financial stability mechanisms, and government debt management.
The proposed legislation is being viewed as one of the most significant overhauls of Nepal’s central banking framework in decades, with the objective of transforming Nepal Rastra Bank into a modern, risk-based, digitally enabled central bank aligned with international financial standards.
Under the proposed amendments, Nepal Rastra Bank would receive expanded authority not only to formulate monetary policy but also to oversee its implementation and monitoring.
The bill requires the central bank to issue monetary policy within one month of the beginning of each fiscal year and conduct quarterly reviews and assessments.
The proposed framework also redefines the relationship between policy formulation and implementation, giving NRB clearer powers to enforce compliance by banks and financial institutions on matters related to interest rates, liquidity management, and credit flows.
Economists say the move could strengthen monetary transmission mechanisms and improve the effectiveness of policy interventions in managing inflation, financial stability, and economic growth.
One of the most notable provisions in the bill is the formal legal recognition of digital currency.
The amendment proposes bringing banknotes, coins, and digital currency under a unified legal framework, paving the way for the future issuance and regulation of a potential central bank digital currency (CBDC).
The bill outlines provisions related to the issuance, exchange, security, storage, and management of digital currency, creating the legal foundation required for Nepal’s transition toward digital finance.
If enacted, Nepal would join a growing number of countries exploring digital currency initiatives as central banks worldwide modernize payment systems and financial infrastructure.
The proposed legislation also seeks to strengthen Nepal’s banking sector resilience by introducing a framework for early intervention in troubled financial institutions.
A system of Prompt Corrective Action (PCA) would allow regulators to identify financial weaknesses at an early stage and take corrective measures before problems escalate.
If a bank or financial institution becomes unsustainable, the central bank would be empowered to take control, initiate restructuring, facilitate mergers, or proceed with resolution measures.
Financial experts have long advocated for stronger crisis-management tools, particularly following banking sector stress experienced in several global markets over the past decade.
The bill introduces stricter controls on government borrowing from the central bank.
Under the proposed provisions, loans extended by Nepal Rastra Bank to the Government of Nepal would be limited based on the average revenue collection of the current and previous fiscal years and other prescribed ceilings.
The measure is intended to strengthen fiscal discipline and reduce excessive dependence on central bank financing, a practice often associated with inflationary pressures and macroeconomic risks.
Analysts believe the change could improve Nepal’s fiscal credibility and align government borrowing practices with international best practices.
The amendment also revises the capital structure of Nepal Rastra Bank.
If the central bank’s capital falls below prescribed levels, the Government of Nepal would be required to replenish the shortfall within a specified timeframe.
The bill further proposes establishing multiple reserve funds, including:
These mechanisms are expected to enhance the financial strength and operational independence of the central bank.
To improve transparency and governance, the bill proposes significant reforms to auditing and risk-management systems.
The legislation requires:
The reforms are designed to align Nepal’s central banking operations with internationally accepted standards in financial governance and accountability.
Another major reform involves the creation of a centralized digital framework for financial compliance.
The bill proposes maintaining centralized records relating to:
A centralized system is expected to improve regulatory oversight, reduce financial crime risks, and strengthen the country’s ability to monitor suspicious financial activities.
The move comes as Nepal seeks to further strengthen its anti-money laundering regime and improve compliance with international financial standards.
The amendment significantly restructures Nepal’s bank resolution framework.
Where troubled institutions cannot be restored to normal operations, authorities would be able to implement advanced resolution mechanisms, including:
The bill also grants expanded authority to special management groups responsible for restructuring distressed institutions, managing assets, and overseeing liquidation or recovery procedures.
The proposed amendments represent a major shift in Nepal’s financial architecture, reflecting global trends in central banking, financial supervision, digital payments, and crisis management.
By introducing legal provisions for digital currency, strengthening monetary policy governance, enhancing banking supervision, tightening government borrowing rules, and improving financial sector crisis management, the legislation aims to position Nepal Rastra Bank as a modern central banking institution capable of addressing the challenges of an increasingly digital and interconnected economy.
For investors, commercial banks, fintech companies, and financial market participants, the reforms could mark a new phase in Nepal’s financial sector modernization and regulatory evolution.
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