For the first time in Nepal’s history, the appointment of a new governor for Nepal Rastra Bank (NRB) became mired in a major controversy. Traditionally, a successor is named before the incumbent’s term ends. However, following the retirement of Maha Prasad Adhikari—Nepal’s 17th governor—on April 5, the appointment was delayed by more than six weeks.

Despite expectations that the ruling coalition of Nepali Congress (NC) and CPN-UML would move swiftly to find a successor to Adhikari, the process descended into political dysfunction. With the constitution requiring that the federal budget must be unveiled on May 29, appointing a new central bank chief in time was essential. Yet, Prime Minister KP Sharma Oli and NC President Sher Bahadur Deuba failed to agree on a candidate for over two months, violating legal provisions requiring the appointment process to begin at least one month prior to the incumbent’s departure.

What followed was political chaos. Although a recommendation committee—comprising Finance Minister Bishnu Prasad Paudel, former NRB governor Bijayanath Bhattarai and economist Biswo Poudel—was eventually formed, it never convened due to persistent political deadlock. This forced Bhattarai to step down. 

Over the following weeks, several names, including Deputy Governor Neelam Dhungana, NRB Executive Director Gunakar Bhatta and former Nabil Bank CEO Gyanendra Dhungana, were floated to succeed Adhikari. A writ petition was filed in the Supreme Court challenging Bhatta’s potential appointment even before it was officially announced.

Meanwhile, political infighting escalated. Deputy Governor Neelam Dhungana, reportedly aligned with the CPN-UML, blocked the resignation of Bhatta, the NC’s pick for governor. Then came the nomination of Biswo Paudel who contested the 2022 parliamentary election from the Chitwan-1 under the Nepali Congress banner. Poudel resigned from the recommendation committee to make him available for recommendation. However, yet another petition was filed, questioning his eligibility for the position. After weeks of maneuvering, Poudel was finally appointed governor on May 20, 2025.

While Poudel’s credentials as an economist are not in question, some observers argue that a monetary economist would have been more suitable to lead the central bank, especially when such candidates were available. According to Bhojraj Pokharel, former Chief Election Commissioner, the governor appointment saga reflects a deeper governance crisis.

“Nepal has adopted an open economic policy, and regulatory bodies are central to its implementation. The economy’s fate depends on how well these institutions function. They require leadership with integrity—leaders committed to working within the legal framework,” Pokharel said. “Sadly, the government has failed in this respect. The ruling parties are more focused on capturing institutions rather than ensuring capable leadership. Individual interests now override national priorities. As a result, regulatory bodies meant to safeguard the economy often fail in their duties—some are denied the authority they deserve, while others operate without accountability.”

SEBON Chair Appointment: A Political Flashpoint

It took the government nearly 11 months to appoint a new chairperson of the Securities Board of Nepal (SEBON). On December 25, 2024, Santosh Narayan Shrestha was named head of the country's capital market regulatory body. The prolonged delay became a major political flashpoint between coalition partners CPN-UML and CPN (Maoist Center), reportedly stemming from a power struggle between then Finance Minister Barsha Man Pun and UML Chairperson Oli.

Political maneuvering, allegedly driven by powerful business families lobbying for a new stock exchange license, further complicated the process. The fallout was significant: the coalition government led by Pushpa Kamal Dahal eventually collapsed. Finance Minister Pun later claimed that the UML-Maoist Center alliance fell apart because they resisted pressure from influential interest groups.

Though Sebon Chairperson Shrestha has yet to approve a new stock exchange license, an action many believed motivated his appointment, he has already become embroiled in a new controversy. Shrestha is under scrutiny for allegedly soliciting kickbacks for granting IPO approvals.

A Question of Qualifications

The appointment of Sharad Ojha as chairperson of the Nepal Insurance Authority (NIA) took many by surprise. A former journalist with no documented high-level managerial experience, Ojha secured the role largely due to his ties to NC President Deuba—despite falling short of eligibility criteria.

At first glance, Ojha’s appointment seemed to break the tradition of handing regulatory positions to retired bureaucrats as post-retirement sinecures. However, the Insurance Act, 2022, requires that the chairperson must possess a Master’s degree in a relevant field, such as insurance or finance, and at least five years of senior managerial experience. While Ojha has a varied professional background, there is no public record of him meeting these qualifications, nor is he known as an expert in the insurance or financial sectors. This raises serious concerns about the documentation submitted to, and accepted by, the selection committee.

As per media reports, Ojha’s appointment was facilitated by a powerful network, supported by the Ojha family’s longstanding association with Deuba. This influence reportedly played a decisive role in securing the position. Ojha replaces Surya Prasad Silwal, who was suspended amid corruption allegations but later cleared by the Special Court, raising further questions about the political motives behind his removal. The episode exemplifies how political maneuvering often overrides legal mandates and ethical standards in public appointments.

“Appointments to regulatory bodies have always been politically driven, and the criteria for leadership in these institutions still lack a merit-based approach,” said Surya Nath Upadhyaya, former Chief Commissioner of the Commission for the Investigation of Abuse of Authority (CIAA). “Proficiency in the relevant field must be a core requirement. As long as these appointments remain politicized, leaders of regulatory bodies will continue to prioritize political interests over the institutions they serve or the public they are meant to protect.”

Fight for Digital Banking and Asset Reconstruction Company Licenses

In recent years, Nepal's regulatory landscape has witnessed a troubling trend: the growing collusion between business interests, political power brokers and government institutions. Nowhere was this more evident than in the governor appointment. With the imminent rollout of digital banking licenses and the establishment of an asset reconstruction company, the stakes have never been higher.

The succession race began even before Adhikari's term at the NRB had ended. Several hopefuls abruptly resigned from their positions to signal availability, while political and financial factions actively pushed their preferred candidates. Sources say the contest was not just about qualifications but about control. Powerful networks of senior officials, business families and individuals with undisclosed offshore assets were reportedly seeking a compliant governor—someone who might enable dubious financial operations, including the potential ‘whitening’ of black money through the formal banking system. The speed and openness of these lobbying efforts lend disturbing credibility to these concerns.

The government's plan to issue a license for a single digital bank has added fuel to the fire. With its potential to handle massive transaction volumes and attract large-scale investment through public offerings, the license is now viewed as a gateway to unparalleled financial influence. Consequently, the battle over the governorship became a proxy war for control over this new and powerful financial instrument.

The Erosion of Meritocracy

These three appointments are emblematic of a larger crisis in governance. Political interference is steadily eroding the independence and credibility of regulatory bodies. Lawmakers have gone so far as to allege that the NRB governorship was treated as a commodity, with multi-billion-rupee deals allegedly linked to the appointment process. The perception that such high offices are up for sale has severely undermined public trust.

Regulatory agencies, which are responsible for overseeing critical sectors such as finance, energy and telecommunications, have become politicized, with appointments made based on loyalty rather than competence. From the NIA to the Nepal Electricity Authority (NEA) and the SEBON, patterns of favoritism are evident. Legal norms are increasingly overridden by political influence, and critical decisions are often made to serve vested business interests rather than the public good. “The government bypasses parliamentary scrutiny to make appointments that should be rigorously vetted. Parliament itself is defunct, and the system is being mocked,” said Shree Hari Aryal, former president of Transparency International Nepal.

The Nepal Telecommunications Authority (NTA), the telecommunication sector regulator, has not been spared either. The previous coalition government, led by the NC and Maoist Center, appointed Bhupendra Bhandari as NTA chairperson primarily due to ties to Maoist Center Chairperson Pushpa Kamal Dahal and businessman Upendra Mahato. This pattern of using regulatory positions as political rewards is replicated across the public sector.

Poor appointments have serious economic consequences. Take the 2017 appointment of Chandra Singh Saud as CEO of the Nepal Stock Exchange (NEPSE). A close ally of NC President Deuba, Saud had been previously accused of market manipulation during his tenure at Nepal Insurance Company Ltd. His stint at NEPSE further eroded trust in capital markets.

Saud resigned in August 2021 amid allegations of insider trading in the Sarbottam Cement case. He had purchased 10,000 units of shares of Sarbottam Cement in his wife's name at prices significantly below the expected IPO rate. Bhishma Raj Dhungana, then Chairperson of the SEBON, was also implicated in the same controversy for allegedly buying 11,911 units of Sarbottam shares in his daughter’s name before the IPO. Dhungana was eventually sacked by the cabinet in October 2021 after the investigations confirmed unethical conduct.

In the telecom sector, the appointment of Sunil Paudel as Managing Director of Nepal Telecom in 2022 raised alarms. Despite lacking industry experience, he was appointed after the government amended guidelines to accommodate him. Paudel’s tenure ended with a nine-year prison sentence and a Rs 230 million fine for corruption in the National Payment Gateway procurement—a stark example of how political appointments can fuel mismanagement and embezzlement.

Nepal Airlines Corporation (NAC) offers a similarly grim case. Sugat Ratna Kansakar was reappointed as CEO in 2015 despite previous corruption charges. Though acquitted in 2011, his 2024 conviction in the aircraft procurement scandal resulted in a prison sentence and order to repay Rs 122.59 million. His successor Yubaraj Adhikari, also appointed through political connections, has faced multiple controversies as NAC sinks deeper into financial crisis. “Corruption in appointments drains public resources and deters foreign investment. Nepal’s falling score on global corruption indices signals growing risks to economic stability,” said Hari Bahadur Thapa, a former executive at Transparency International Nepal.

Transparency International’s 2024 Corruption Perceptions Index (CPI) ranked Nepal 107th out of 180 countries, down from the previous year. This decline reflects eroding trust in institutions, which discourages foreign direct investment (FDI) and hampers sustainable development.

Institutionalized Policy Corruption

Policy corruption, where budgets and laws are manipulated to benefit elites, has become normalized. Unlike bribery, it is masked under legal frameworks through cabinet decisions, making it harder to detect or challenge.

In 2022, the Finance Minister Janardan Sharma introduced excise changes favoring specific industrial lobbies. The decision to increase duties on imported billets while cutting taxes on sponge iron harmed many manufacturers and benefited a few politically connected firms.

From 2007 to 2017, VAT refunds on imported goods like phones and sugar drained over Rs 30 billion annually. Consumer prices remained unchanged, revealing that the windfall went to traders. The scheme was halted only in 2018/19, after significant public losses.

The 2014 Tax Settlement Commission further exemplifies policy corruption. It settled Rs 30 billion in tax claims for just Rs 9.54 billion, resulting in a Rs 21 billion loss to the state. Meanwhile, a 2014/15 customs duty waiver on cable car equipment aligned with the Chandragiri Cable Car project which also secured national forest land at a suspiciously low cost through opaque cabinet decisions.

“Middlemen now openly bid for public offices. Oversight bodies, themselves politicized, remain silent, creating a self-sustaining system of corruption,” said Thapa of Transparency International.

(This news report was originally published in  June 2025 issue  of New Business Age Magazine.)