Despite Nepal Rastra Bank (NRB) being empowered by law as an autonomous institution, the government has introduced a bill that could compromise this autonomy. The Banking Offenses and Punishment Amendment Bill, 2023, proposes that NRB must consult the Ministry of Finance when formulating procedures related to check bounce. The Finance Committee of the Federal Parliament on Thursday passed this provision with some amendments, raising concerns about its impact on NRB’s autonomy.

The proposed Section 3A (7) of the Banking Offenses and Punishment Act, originally enacted in 2008, states that "the procedure for proving check bounce shall be determined by Nepal Rastra Bank in consultation with the Government of Nepal and the Ministry of Finance." During discussions in the Finance Committee, several parliamentarians expressed concerns that this requirement would undermine NRB’s autonomy. Despite these concerns, the provision was approved.

Parliamentarian and former Finance Minister Barshman Pun voiced his opposition, stating that since NRB is autonomous body and serves as an advisor to the government, it should not be required to consult the Ministry of Finance on such matters. Parliamentarians Julie Kumari Mahato and Ganga Karki also questioned whether consulting the Ministry of Finance when drafting procedures for check bounce would violate NRB's independence.

However, Prakash Sharan Mahat, the former finance minister who introduced the bill, argued that the autonomy of NRB would not be compromised by consulting the Ministry of Finance. Following this debate, Committee Chair Santosh Chalise announced the passage of the controversial section of the bill that includes the requirement for consultation with the Ministry of Finance.

The Nepal Rastra Bank Act of 2002 defines NRB as an autonomous institution. However, an amendment in 2016 allows the government to issue directives to NRB, which the central bank must follow.

In October 2022, then-Finance Minister Janardan Sharma formed a committee within the Ministry of Finance to study bank interest rates, leading to criticisms that the government was overstepping into NRB’s domain. On Sharma's recommendation, the government suspended Governor Mahaprasad Adhikari and launched an investigation. However, the court later reinstated Adhikari.

While the law grants NRB autonomy over the formulation and implementation of monetary policy, government interference delayed the announcement of the current fiscal year’s monetary policy by one week. Although the government pledged to enhance NRB’s autonomy to secure the Extended Credit Facility (ECF) from the International Monetary Fund (IMF), the proposed amendment to the Banking Offenses and Punishment Bill is expected to further curb NRB’s functional independence.

The government has also stated, in a formal communication, that it plans to strengthen NRB’s autonomy by amending the Central Bank Act. It promised institutional, functional, staffing, and financial independence for the central bank and has set an agenda to register the amendment bill in Parliament by mid-October 2024.