Central bank introduces new licensing policy

  • Banks and financial institutions should get new licence to provide e-payment services

Kathmandu, July 27

Nepal Rastra Bank (NRB), the central bank, has directed banks and financial institutions (BFIs) to obtain fresh licence to provide electronic payment services.

The instruction was issued today following introduction of the Licensing Policy for Payment Service Providers and System Operators, which has enabled NRB to officially function as oversight agency to monitor, supervise and regulate activities of payment service providers, including BFIs, domestic money transfer companies and firms like e-Sewa, as well as payment system operators, such as clearing houses and companies, like VISA, MasterCard and SCT.

The new directive means BFIs that are providing mobile and internet banking, and electronic card services must re-register their businesses at the Payments System Department of NRB.

Earlier, BFIs had to seek permission of the Bank and Financial Institution Regulation Department to provide mobile banking service, while simple notification to NRB was enough to cater internet banking and card services.

“With the introduction of the new licensing policy, BFIs must seek fresh licence to offer mobile and internet banking, and electronic card services,” a senior NRB official said on condition of anonymity. “However, BFIs providing branchless banking services need not seek fresh licence from the Payments System Department to continue offering those services, as monitoring, supervision

and regulation of that business will be conducted by the Bank and Financial Institution Regulation Department.”

BFIs are offering branchless banking services in rural areas where banking institutions have not established physical branch offices. In such branchless

banking units, BFIs recruit their staff to collect deposits and make use of point of sales (PoS) terminals to enable clients to withdraw deposits. Branchless banking units are also used to extend loans and collect credit instalments from borrowers.

“Although branchless banking units use PoS terminals to conduct financial transactions, the nature of this business is quite different, so we have decided not to bring it under the new licensing policy,” the NRB official said.

The new licensing policy has paved the way for telecom companies to set up subsidiary firms to provide online and mobile payment services. Such subsidiary companies should be established with a minimum paid-up capital of Rs 10 million.

The policy has also directed companies providing online and mobile payment services, such as e-Sewa, Hello Paisa and iPay, to register their businesses with NRB. The licensing policy has also made it mandatory for foreign payment service operators, such as VISA, MasterCard and SCT, to obtain licence if they want to continue operating their businesses in Nepal.