A major debate is unfolding in Nepal’s financial sector regarding a proposed legal amendment that would prohibit individuals from being both a banker and a businessperson. While the Nepal Rastra Bank (NRB) is pushing for this separation, bankers and business leaders are expressing strong opposition.
The proposed amendment to the Bank and Financial Institutions Act (BAFIA) is now under discussion in the Finance Committee of the Federal Parliament.core idea is to prevent any one individual from simultaneously owning significant shares in banks and operating businesses, aiming to reduce conflicts of interest and strengthen the integrity of the financial system.NRB Governor Maha Prasad Adhikari and current Governor Maha Bishwanath Paudel (note: the article says Paudel) argue that this separation is essential for long-term financial stability and transparency. Governor Paudel compared the expected change to a “structural earthquake” in the banking system.
The bill proposes that individuals owning more than 1% of paid-up capital in a bank should not be allowed to borrow from any bank or financial institution.It also states that such individuals cannot become board members (directors) in the same bank or financial institution.Federation of Nepalese Chambers of Commerce and Industry (FNCCI) President Chandra Prasad Dhakal opposes the move, claiming it will stifle economic activity, reduce investments, and ultimately hurt employment and revenue.
Santosh Koirala, President of the Bankers’ Association, also criticizes the law’s inconsistency—pointing out that while it seeks to separate bankers and businesspeople, it still allows up to 51% promoter shareholding, which contradicts the separation goal.The amendment also strengthens the definition of “related parties” to prevent them and their family-associated firms from becoming bank directors if they have business loans exceeding 1% of the bank’s paid-up capital.
