MPs Push Cooling-Off Rule, Wider Competition and Shorter Terms for NRB Leadership

KATHMANDU — Lawmakers have proposed substantial changes to the way Nepal Rastra Bank’s top leadership is selected, with amendments to the central bank-related bill seeking tighter eligibility rules for the governor, greater competition in the appointment of deputy governors and shorter tenures for senior officials.

The amendments, registered under serial numbers 37 to 44, cover several aspects of central bank governance. They range from introducing a cooling-off period for commercial bank executives to opening deputy governor positions to outside experts and reducing the tenure of the governor and other senior officials from five years to four.

Although the proposals differ in approach, they share a broader theme: reducing discretion in appointments and creating clearer rules around who can enter the leadership of Nepal’s central bank.

Two-year cooling period proposed for bank CEOs

One of the most consequential proposals has come from lawmaker Guru Prasad Baral, who wants former chief executives of commercial banks to wait at least two years after leaving their positions before becoming eligible for recommendation as NRB governor.

The proposed cooling-off period would be inserted into Section 15(3) of the Nepal Rastra Bank Act.

The proposal addresses a potential conflict-of-interest issue inherent in central bank appointments. Commercial banks are among the institutions directly regulated and supervised by NRB. Moving immediately from the leadership of a regulated institution to the top position at the regulator can therefore raise questions over institutional independence and previous professional relationships.

A two-year separation would not automatically eliminate such concerns, but it could create a clearer boundary between private banking leadership and regulatory authority.

The provision could also significantly narrow the immediate pool of candidates for governor whenever senior commercial bank executives are being considered. Former CEOs would remain eligible, but only after completing the prescribed cooling period.

Debate shifts to how deputy governors should be selected

Several amendments focus on deputy governors, indicating that lawmakers are not only debating who should qualify for the posts but also whether the existing internal selection mechanism provides sufficient competition.

Lawmaker Lima Adhikari (Acharya) has proposed that when the governor recommends twice the number of candidates required for vacant deputy governor positions, the list should contain at least one senior NRB official selected on the basis of performance and one person who meets the qualification required to become a board director.

The proposal would therefore prevent the recommendation process from being confined entirely to one category of candidates.

Lawmakers Khushbu Oli and Ramesh Kumar Malla have proposed another model. Their joint amendment seeks to require two candidates from among NRB’s senior officers and one distinguished person meeting the qualifications prescribed under Section 20.

Both proposals point towards a similar policy objective—combining institutional experience from within NRB with expertise available outside its existing senior bureaucracy.

Proposal to bring an outsider directly into NRB leadership

Lawmaker Sushil Khadka has proposed a more fundamental restructuring. He wants the number of deputy governors increased to three, compared with the existing structure envisaged in the bill.

Under his proposal, two deputy governors would be selected from among NRB executive directors. Their names would have to be recommended at least 30 days before the posts become vacant.

The third deputy governor could come from outside the central bank. Khadka has proposed allowing an economist or financial-sector expert aged below 50 to fill that position.

This would represent a significant change in the institutional structure of the central bank. Rather than relying primarily on career officials who rise through NRB’s hierarchy, the proposal would formally reserve space for external professional expertise at the deputy governor level.

Such a model could broaden the range of knowledge available to the central bank, particularly in areas such as macroeconomics, banking regulation, financial markets and emerging financial technologies.

It would, however, also create another governance question: how outside candidates should be assessed and selected to ensure that opening the position does not simply create another avenue for politically influenced appointments.

The effectiveness of an external appointment system would therefore depend heavily on the transparency of eligibility criteria, evaluation and recommendation procedures.

One-year experience requirement before deputy governor vacancy

Baral has proposed another important restriction for candidates coming from within NRB.

Under his amendment, anyone seeking appointment as deputy governor would need to have been serving as an executive director at least one year before the position becomes vacant.

The proposal seeks to replace the three-day provision contained in the bill with a substantially longer one-year requirement.

The difference is significant. A three-day requirement would theoretically allow a person promoted to executive director shortly before a deputy governor vacancy to become eligible almost immediately. A one-year condition would require candidates to demonstrate a meaningful period of experience at the executive-director level before entering the selection process.

If adopted, the amendment could reduce the possibility of last-minute promotions being used to establish eligibility for deputy governor appointments.

At the same time, it would reduce flexibility by excluding recently promoted officials regardless of their broader experience or professional performance.

Baral has separately proposed removing the words relating to a “director” from the provision under Section 18(2), another indication that lawmakers are examining not only the appointment process but also the legal structure governing senior NRB positions.

Five-year tenure could fall to four

A separate proposal from lawmakers Sushil Khadka and Parashuram Tamang seeks to reduce the tenure of the governor, deputy governors and directors from five years to four years.

The amendment would have important implications for the institutional cycle of the central bank.

Supporters of shorter terms may argue that a four-year tenure creates more frequent opportunities to evaluate leadership and replace officials whose performance is considered inadequate.

But central banks also depend heavily on policy continuity and institutional independence. Monetary policy, financial regulation and banking-sector reforms often extend beyond a single year, meaning that leadership stability can be particularly important.

A shorter tenure could therefore produce a trade-off between more frequent accountability and longer-term policy continuity.

The effect would also depend on rules governing reappointment and the extent to which appointment schedules overlap with political changes in government.

Different amendments reveal competing models

Taken together, the proposals show that lawmakers are considering at least three different approaches to reforming NRB leadership.

The first seeks to prevent conflicts of interest, illustrated by the proposed two-year cooling-off period for commercial bank CEOs.

The second seeks to raise the experience threshold, reflected in the proposal requiring deputy governor candidates to have served as executive directors for at least one year.

The third seeks to broaden competition, allowing qualified professionals from outside NRB to compete alongside career central bank officials.

These objectives do not necessarily conflict, but combining them into a single appointment framework will require careful legislative design.

An appointment system can become more competitive by expanding the candidate pool, but it must also establish safeguards against political appointments. Similarly, stricter experience requirements may protect institutional knowledge but could limit opportunities for specialised expertise from outside the organisation.

Central bank independence at the heart of the debate

The importance of the proposed amendments extends beyond individual appointments.

The governor and deputy governors sit at the centre of decisions involving monetary policy, banking supervision, foreign exchange management and financial stability. Rules governing their appointment can therefore have consequences for perceptions of NRB’s independence and credibility.

A transparent appointment process does not guarantee an independent central bank, but unclear eligibility criteria or highly discretionary appointments can create doubts over whether officials were chosen primarily for professional competence.

The cooling-off proposal is particularly relevant from that perspective because NRB regulates the same commercial banks whose executives may later become candidates for governor.

Meanwhile, proposals to include external experts attempt to address a different concern: whether leadership selection should remain dominated by the central bank’s own bureaucracy or draw from a wider pool of economic and financial expertise.

Proposals are not law yet

None of the amendments has taken legal effect. They are proposals submitted by lawmakers and will have to go through parliamentary deliberation before any of them can become part of the final legislation.

Some could be accepted in their current form, others may be revised during committee or parliamentary discussion, and some may be rejected entirely.

The significance of the amendments at this stage lies primarily in the issues lawmakers have placed before Parliament.

Rather than focusing only on the formal powers of Nepal Rastra Bank, the debate is increasingly turning towards who should lead the institution, how they should be selected, how long they should remain in office and what safeguards should separate regulators from the institutions they regulate.

The eventual shape of the legislation will therefore determine more than the eligibility of future governors and deputy governors. It could redefine the balance between internal experience, outside expertise, political discretion and institutional independence at Nepal’s most important financial regulator.