July 21: Nepal Rastra Bank has given letter of intent (LOI) to Nepal Telecom to operate payment service (mobile money) including utility payment service. The central bank has paved way for Nepal Telecom to operate such service after an agreement in principle between the two organisations.

Nepal Telecom had filed an application with NRB a year ago to operate payment service in collaboration with Rastriya Banijya Bank (RBB). Nepal Telecom spokesperson Rajesh Joshi said that they have received the LOI from NRB and the necessary process for the operation of the service has been initiated.

To provide the utility payment service, Nepal Telecom and RBB must establish a separate company with their joint investment. Nepal Telecom needs to file another application within six months for final approval after managing necessary infrastructure for the new venture.

NRB will then conduct necessary study such as the company’s staff, software and other issues and give final approval for the operation within a month. NRB says Nepal Telecom can operate the new service only after fulfilling all the criteria.

The paid-up capital of the joint-venture company, where the majority shares will be of Nepal Telecom, has to be Rs 1 billion. Spokesperson Joshi said that the company will be registered within a week.

“We have already started the process to establish the joint venture company. Probably, the company will be registered within a week,” he said, “Then we will make necessary arrangement for infrastructure such as installing software, setting up office and visit central bank for final approval.”

This new service is a kind of digital wallet. Customers will be able to make various payments through a mobile application by registering their mobile number and account number of RBB.

There will also be a top-up service. According to Nepal Telecom, all types of transactions can be done through the app. RBB will have its role in amount settlement.

Telecommunication companies are working as a payment service provider in abroad. In some countries, telecom companies are ahead of banks in this regard. This is the first time in Nepal that a payment service has been launched under the leadership of a telecom company.  For this, Nepal Telecom has already completed all necessary procedures.

Managing Director of the Nepal Telecom, Dilliram Adhikari, said this new service will provide accessibility of digital transaction to the people of rural areas as well. “Nepal Telecom has reached to the places where banking service is not yet available,” he said adding, “In this regard, it is expected that it will be easier to provide them banking services.”

He further said the mobile money service is being launched with the objective of increasing financial inclusion and access to digital transaction.

“While we have a nationwide network, RBB has a long experience in the financial sector,” he said, adding, “We can operate the service effectively by using two pillars.” Adhikari also said that the service would be more reliable as both Nepal Telecom and RBB are government-owned companies.