By legally introducing "digital currency" and "digital bank" frameworks, the amendment brings Nepal's regulatory landscape into alignment with global financial shifts. Furthermore, the bill explicitly curtails government interference by redesigning board appointments and eliminating bureaucratic overreach, effectively transforming the central bank into a highly autonomous, powerful, and independent regulator.
Digital Currency and the Evolution of Modern Banking
The proposed amendment officially redefines the legal concept of money in Nepal, expanding it beyond physical paper notes and metallic coins to grant the central bank authority to issue Central Bank Digital Currency (CBDC). Unlike commercial digital wallets like eSewa or Khalti, this digital money will be an official, sovereign currency guaranteed directly by Nepal Rastra Bank (NRB).
Furthermore, the bill introduces legal frameworks for digital banks—branchless, purely tech-driven financial institutions that will operate entirely online under NRB licensing and regulation. To address modern financial complexities, the law also establishes the concept of a "financial holding company" to oversee conglomerate structures of BFIs. This expands NRB’s regulatory and supervisory reach to tightly encompass not just traditional banks, but also remittance firms and payment service providers.
Independence of NRB with Refined Objectives
The proposed law shifts the core mandate of NRB to prioritize price stability (controlling inflation) as its foremost objective, followed by maintaining external sector and financial stability. To safeguard the central bank from political pressure, the amendment removes Section 106 (c) of the existing Act, which previously allowed the government to issue direct instructions to the NRB. Eliminating this provision grants the central bank operational autonomy to make independent monetary and regulatory decisions in line with international standards.
Additionally, the bill modernizes the definition of "monetary obligation" to enhance financial transparency. Moving beyond the old framework—where only circulating notes and coins were counted as bank liabilities—the new definition incorporates government and institutional deposits held at the NRB. This reclassification aligns the central bank's balance sheet accounting with modern global standards, reflecting its true financial responsibilities.
Appointment of Governor and Board of Directors
The proposed amendment introduces strict governance reforms to NRB to eliminate long-standing controversies surrounding political interference and conflicts of interest.
The NRB Board of Directors will expand from 7 to 9 members. Crucially, the number of independent, outside expert directors will increase from 3 to 5, ensuring that independent professionals hold majority influence over central bank decisions rather than government officials.
In a major policy shift, former Chief Executive Officers (CEOs) of commercial banks are now disqualified from directly transitioning into the role of Governor. This rule is designed to eliminate favoritism or cozy relationships between the regulator and commercial bank owners.
Except for the Secretary of the Ministry of Finance, no current employee of any government body or public institution can sit on the board. Furthermore, retired NRB personnel face a strict 3-year cooling-off period before they can be appointed as independent directors.
If the Governor faces an official misconduct inquiry, the investigating committee will now be headed by a High Court Chief Justice rather than a Supreme Court judge. Additionally, the Governor will be legally required to secure prior government approval before traveling abroad.
New "Resolution" Framework Introduced to Save Problematic Banks and Protect Depositors
The proposed amendment establishes a systematic "resolution" framework to handle failing financial institutions, replacing unpredictable closures with structured interventions to secure public savings.
If a bank or financial institution faces bankruptcy, NRB can step in and appoint a "special administrative group" to take full management control and stabilize operations.
If an institution completely collapses, a temporary bridge institution will be established. Depositors' accounts and the bank’s secure assets will be transferred to this new entity, allowing regular banking transactions to continue seamlessly without freezing public money.
Operating as the lender of last resort, NRB is empowered to extend a special 180-day emergency loan to rescue banks experiencing severe liquidity crises.
The amendment prohibits banks from acting as guarantors for government agency loans. However, to help clean up non-performing assets, the NRB will allow banks to invest up to 10% of their funds into a dedicated Asset Management Company (AMC) tasked with recovering bad loans.
Provision of new funds and 'marks' of loans
In order to strengthen the financial condition of the bank, the new law provides for four different types of funds. The first is the 'general reserve fund', which helps to increase the capital of the bank. The second is a 'revaluation reserve fund', which manages the profit or loss that occurs when the price of gold and foreign currency fluctuates. The third is the 'Financial Development Fund', which will have up to 5 percent of the bank's total liabilities and will help increase financial access. The fourth is a 'special reserve fund', in which special works will be done by keeping up to 2 percent of the money.
Another interesting thing is that now the Credit Information Centre will also store and exchange information related to the credit of cooperatives. This will identify those who take loans from banks and mislead cooperatives or lie to cooperatives. In addition, a new system of 'credit scoring' of borrowers will also be introduced. This means citizens’ll be given a 'number' or 'digit' depending on how they've paid off the loan. If this number is good, it will open the way to get a loan easily and cheaply in the future.
