Nepal Rastra Bank Reform Bill Enters Parliamentary Review Amid Debate Over Autonomy, Leadership and Digital Finance

A major legislative effort to modernize Nepal Rastra Bank has entered the parliamentary review process, opening discussions on the future structure, leadership system, monetary policy framework and regulatory authority of the country’s central bank.

The Nepal Rastra Bank (Third Amendment) Bill, 2083 was forwarded by the House of Representatives to the concerned parliamentary committee for clause-by-clause discussion after lawmakers approved the proposal presented by Finance Minister Dr. Swarnim Wagle. The move has formally begun the process of reviewing possible changes to the legal framework governing Nepal’s central monetary institution.

The proposed amendment aims to make Nepal Rastra Bank more modern, independent and effective in responding to changes in the financial sector. However, the discussion has also brought several sensitive issues to the forefront, particularly regarding the balance between central bank autonomy, government oversight and institutional accountability.

During the initial discussion stage, 18 lawmakers submitted amendment proposals covering a wide range of issues, including the composition of the central bank’s board, appointment procedures for the governor and deputy governors, tenure limits, professional qualifications, digital banking regulation, central bank digital currency and financial governance.

One of the key issues raised by lawmakers is the tenure of senior officials at Nepal Rastra Bank. Under the existing arrangement, the governor, deputy governors and board members serve five-year terms. Several lawmakers have proposed reducing this period to four years, arguing that shorter terms could strengthen accountability and prevent excessive concentration of authority in top positions.

Rastriya Swatantra Party lawmaker Sushil Khadka has proposed limiting the tenure of the governor, deputy governors and directors to four years instead of five. Supporters of the proposal argue that periodic leadership changes could improve institutional balance and ensure greater responsiveness within the central bank.

Another major proposal involves increasing the number of deputy governors. Currently, Nepal Rastra Bank has two deputy governors, but some lawmakers have suggested increasing the number to three.

The proposal submitted by lawmakers including Khushbu Oli, Ramesh Kumar Malla and Sushil Khadka seeks to amend the existing provision to create three deputy governor positions. Under the proposed structure, two deputy governors would be selected from among the bank’s executive directors, while one position would be opened for an external expert with specialized knowledge in economics, banking or finance.

Supporters of this change argue that bringing external expertise into the central bank’s leadership could help combine institutional experience with fresh perspectives, particularly as financial systems become more complex and technology-driven.

The structure of Nepal Rastra Bank’s board has also become a major area of debate. The current seven-member board consists of the governor, two deputy governors, the finance secretary and three government-appointed directors.

The amendment bill proposed expanding the board to nine members by increasing the number of non-executive directors. However, some lawmakers have opposed expanding the structure and have suggested maintaining the existing seven-member arrangement, arguing that a larger board could slow decision-making.

The issue of representation has also entered the discussion. Some lawmakers have proposed mandatory female participation in the board, suggesting that at least one or two female directors should be included among non-executive members.

Another significant proposal relates to the appointment process of the governor. Lawmakers have raised concerns about possible conflicts of interest when individuals with close links to commercial banks or financial institutions move directly into central bank leadership.

Some amendment proposals seek to introduce a “cooling-off period” that would prevent senior officials of commercial banks from immediately becoming eligible for the position of governor. Sushil Khadka has proposed restricting individuals holding more than 0.5 percent ownership in commercial banks or financial institutions from becoming governor or board members.

Similarly, lawmakers have suggested that chief executive officers of banks should only become eligible for central bank leadership positions after completing a certain separation period from their previous roles.

The qualification criteria for senior officials at Nepal Rastra Bank have also been proposed for revision. Existing requirements mainly focus on economics, monetary policy, banking and finance. However, lawmakers have suggested expanding the eligibility criteria to include expertise in information technology, digital banking, engineering, agriculture, environment and other emerging fields.

The proposal reflects the changing nature of the financial sector, where technology, cybersecurity, digital payments and financial innovation have become increasingly important areas of central bank responsibility.

Digital currency and cryptocurrency regulation have emerged as another major component of the proposed reform. Lawmakers have suggested establishing a clearer legal framework for the Central Bank Digital Currency (CBDC), while maintaining restrictions on private cryptocurrencies and unauthorized virtual asset transactions.

The debate reflects growing recognition that Nepal’s financial system is moving toward digital platforms and that the central bank requires stronger legal authority to regulate emerging financial technologies.

Several lawmakers have also proposed fixing the timing of monetary policy announcements through legislation. Under the proposed changes, Nepal Rastra Bank would be required to publish its monetary policy on the first day of the fiscal year and submit progress reports on implementation to Parliament every three months.

Supporters believe such a provision would improve transparency, predictability and parliamentary oversight of monetary policy decisions.

The process for removing the governor from office has also drawn attention during the amendment discussion. The current law provides for an investigation committee led by a retired Supreme Court judge. The amendment bill proposes forming such a committee under the leadership of a chief judge or judge of the High Court.

However, some lawmakers have opposed changing the existing mechanism, arguing that the removal process must maintain strong safeguards to protect central bank independence.

The wide range of amendment proposals highlights the challenges involved in reforming a central bank. While there is broad agreement that Nepal Rastra Bank needs to adapt to digital transformation, international financial practices and changing economic conditions, questions remain over how reforms will affect institutional independence.

Expanding the board, increasing deputy governor positions and introducing external experts could strengthen the bank’s capacity, but lawmakers will need to carefully assess whether such changes improve efficiency or create additional layers of decision-making.

The central issue in the parliamentary debate is expected to remain the balance between accountability and autonomy. A strong central bank requires the ability to make independent monetary decisions, while democratic institutions also seek transparency and oversight over a powerful financial regulator.

The parliamentary committee will now review the submitted amendments, hold detailed discussions and prepare a revised version of the bill before sending it back to the House of Representatives. The final shape of the third amendment to the Nepal Rastra Bank Act will depend on how lawmakers address these competing priorities during the remaining legislative process.