The Nepal Rastra Bank Act, 2058 BS has entrusted Nepal Rastra Bank with the responsibility of maintaining the country’s price and external sector stability, maintaining financial stability and enhancing public confidence in the financial system. To fulfill this responsibility, the bank has been formulating and implementing policy arrangements including monetary policy, regulatory policy, foreign exchange policy and others. In order to maintain financial stability, the bank has been adopting various international best practices and making the regulation and supervision of financial institutions effective. There has been significant improvement in the promotion of financial inclusion, customer protection and increasing financial access and the modernization of the payment system.
In the journey of Nepal Rastra Bank in fulfilling the above responsibilities, I got the opportunity to lead this prestigious institution as the Governor for five years on Chaitra 24, 2076 BS. I express my heartfelt gratitude to the Government of Nepal Council of Ministers for providing this opportunity. Today, I have reached the stage of fulfilling the responsibility entrusted to me by the Government of Nepal. Due to the global COVID pandemic that began in late 2019, most economic activities were affected, and the global economy, including Nepal, contracted significantly. Without recovering from the pandemic, we had to face high inflation caused by tensions between Russia and Ukraine. Despite such challenges, the Bank has been able to maintain overall economic stability due to the vigilant and timely policy arrangements taken by this Bank. The country’s external sector is strong. The capital adequacy and liquidity of the financial sector are above regulatory requirements, interest rates remain business-friendly, and the inflation that has increased after COVID is gradually decreasing and is currently within the monetary policy target set by the Bank.
Meanwhile, the COVID-19 infection has caused a huge loss of public wealth. Despite the fear of infection, it has been possible to continue the work of the bank at all times due to the active role of the entire staff of this bank. All the Nepal Rastra Bank employees who have been serving the bank with full service, remembering their duty even in such a difficult situation, deserve thanks.
Similarly, the banking community has not only continued its service even in difficult circumstances, but has also implemented the instructions of this bank with the aim of saving itself and its customers. This has not only kept the banking sector moving but also increased the deep faith and confidence of the general public in this sector. I express my heartfelt gratitude to the entire banking community for continuing their service even in difficult circumstances. Respected dignitaries, Important reform works have been completed during the past five years with the aim of fulfilling the responsibilities conferred by law and making the operations of this bank more effective.
Monetary policy has been modernized and liquidity management has been made more effective. To make liquidity management more systematic and the interest rate corridor more effective, arrangements have been made such as permanent deposit facility, stabilization fund, etc.
The COVID-19 pandemic was a challenge for the world economy. The modern world had not faced such a challenge. There was no way to predict how long the impact of the pandemic would last and it was an uncharted territory that no one had decided. Keeping the economic system in balance by utilizing the limited resources available was a big challenge. In such a situation, the bank adopted some traditional and some non-traditional measures while formulating monetary policy carefully and based on facts. Such measures have helped in keeping the economy in balance and in a stronger position compared to peer countries.
During this period, the financial sector has been further strengthened through mergers/acquisitions. Unhealthy competition has been discouraged, while the malpractices in the financial sector have been reduced to a minimum. Important reforms have been made in view of the indiscipline seen on both the lending and borrowing sides. A policy has been adopted to mobilize the resources and means available in the banking sector in the productive sector. Some important provisions such as the loan-deposit ratio provision, the mandatory investment provision for sectors including agriculture and energy, the new provision for single customers, and the working capital loan guidance are provisions dedicated to the long-term interests of the financial system. Although these provisions may cause short-term discomfort to some individuals, communities, and sectors, they will remain necessary and important reforms for the financial system and the overall economy in the long run. For effective regulation and supervision of the financial sector, financial institutions are continuously supervised/monitored based on concepts such as money laundering and cybersecurity supervision, supervision of institutions involved in the payment system, supervision of non-bank financial institutions, etc.
In addition, the country has made significant progress in expanding digital payments due to the incentive measures taken by the bank. Investments by fintech companies, institutions related to payment services, the activism of bank financial institutions, and the interest of the general public have brought about a revolution in electronic payments. I express my heartfelt gratitude to everyone associated with this sector who has helped in achieving this excellent achievement.
During this period, with the intention of facilitating foreign investment and loan inflow, the double approval required for foreign capital investment from this bank has been removed, and clear, transparent and predictable arrangements have been made regarding foreign loans. All Nepalis have been provided with the facility of getting a card facility of up to U. S. Dollar 500.- for essential purposes. This has benefited students, especially students and professionals related to information technology, and it seems that a lot of work has been done by utilizing the facility. The Third Collective Assessment of Nepal in 2022/23 on combating money laundering and terrorist financing commended the progress made by Nepal in the past ten years and suggested that further improvements be made to bring it in line with international standards. The country is under monitoring based on our social environment, behavior, existing risks, level of understanding, and the effectiveness of the implementation of the arrangements in place. After mutual evaluation, most countries naturally remain under monitoring to make further improvements. Such monitoring is not unusual for a country with a less developed system like ours.
There are a large number of legal and regulatory provisions in the country as preventive measures to prevent the laundering of illicit proceeds. The provisions in this regard have been implemented with the intention of ensuring that no institutions and structures become a means of money laundering and terrorist financing. Despite this, there are some people around the world who are involved in such illegal business. In this situation, if such illegal earnings are found and there is suspicion of an attempt to purify them, we should take this journey as an opportunity to effectively implement the arrangements for reporting, analysis, investigation, investigation, prosecution, adjudication and confiscation of the assets created from it and to nationalize them, and to enhance national and international coordination in this regard and to help make the nation a well-governed and prosperous nation.
The proposed draft for amendments to the Nepal Rastra Bank Act, 2058 and the Banks and Financial Institutions Act, 2073 has been sent to the Government of Nepal, Ministry of Finance. Similarly, the proposed draft for amendments to the Banking Offences and Punishments Act, 2064 and the Foreign Exchange (Regulation) Act, 2019 has been sent to the Government of Nepal, Ministry of Finance. Drafts of the Act have been prepared to provide for the Leasing Act, the Financial Customer Protection Act, the Financial Asset Restructuring and Securitization Act, and the Asset Management Act. A study report has been submitted by this bank on the need for a separate law on corporate social responsibility as per the orders of the Honorable Supreme Court. The proposed draft for the legal provisions in this regard has been sent to the Government of Nepal, Ministry of Finance.
Various policies have been formulated to comprehensively manage the work of Nepal Rastra Bank. During the past five years, 11 policies, 9 frameworks, and 18 guidelines have been issued, while 11 directives, 7 manuals, and 41 work procedures have been formulated and are being implemented. In order to make the bank’s operations efficient, accurate, and transparent, the website, FAQs, and the work orders of all departments and offices have been made public so that information is easily available to external stakeholders. During this period, various policy, institutional and procedural reforms have been made to make the bank’s work modern, systematic and more effective. Most of the bank’s operations have been made technology-based by recruiting appropriate human resources to make service delivery faster and more effective. During this period, in order to further strengthen the bank internally, the Information Technology Division has been upgraded to a department, and a new department has been established to supervise non-banking institutions including remittance companies. Similarly, a separate division has been established to provide focused supervision on asset consolidation issues, and the work of supervising market conduct by establishing a Customer Protection Division with Financial Inclusion has begun. During this period, we have completed the audit of the financial statements of the remaining four fiscal years, except for the first year of the COVID-19 pandemic, within the time period specified by the Act and have been able to submit the annual report to the Government of Nepal on time.
During this period, the bank’s financial position has also improved significantly. Apart from the circumstantial reasons, important initiatives have been taken such as diversification of foreign investment, introduction of the practice of working in additional hour shifts in the investment branch of the bank’s foreign exchange management department, etc. This has further strengthened the financial position of the bank and has also resulted in a significant increase in savings transferred to the account of the Government of Nepal.
As the second year of the term approached, the leadership of Nepal Rastra Bank was attacked, resulting in a direct interference in the autonomy of the central bank. I express my heartfelt gratitude to the esteemed Supreme Court, the esteemed judges, the senior learned and respected advocates, and the entire judicial system for keeping the autonomy of this bank intact in accordance with the global norms and essence of central bank operations. In addition, the kind of warning received from the former governors of the bank, learned economists, distinguished individuals, and especially the media world regarding the interference in the autonomy of Nepal Rastra Bank was unforgettable, I express my heartfelt gratitude to all of them. In this way, I request that the past five years, including the years of satisfaction, as a result of the goodwill, cooperation, strength and courage of all here to face the challenges related to it, have added important bricks to the history of Nepal Rastra Bank. A document has been prepared with the purpose of integrating the work done by Nepal Rastra Bank in the past five years and keeping it as an institutional memory. Although various documents covering the activities of the bank have been published in the past, this is the first publication of this nature. It contains details of the amendments/improvements made in the various initiatives that the bank has been taking since the past and the important initiatives taken in the past five years. I am confident that this will be useful in the policy arrangements and procedural reforms to be taken by the bank in the coming days and will provide an opportunity for the general stakeholders to be informed about the important initiatives taken by the bank for the improvement of the economy. Some copies of the document will be available in hard copy now and will also be published on the bank’s website for the information of the stakeholders.
The Honorable Ministers of the Government of Nepal, the Board of Directors of the Bank and the Secretaries of the Government of Nepal, the Deputy Governors, the retired Deputy Governors, the current and retired Executive Directors, Directors, Deputy Directors, the active employee unions in the Bank, and all the employees of the Bank deserve thanks. I would like to express my gratitude to the Government of Nepal, the Ministry of Finance and other government agencies, esteemed commissions, the Office of the Comptroller and Auditor General, the Nepal Army, the Nepal Police, banks and financial institutions and their umbrella organizations, private sector organizations, the media sector, the intelligentsia, foreign central banks, the International Monetary Fund and bilateral and multilateral donor agencies, international organizations, and the general public for their continuous support in the functioning of the bank. (The views expressed by Governor Adhikari through a press conference before leaving after completing his term)
प्रतिक्रिया दिनुहोस्