Government Proposes Strict Entry Barriers for Global Payment Companies in Nepal

The government has announced plans to tighten licensing process for foreign companies seeking to operate payment services in Nepal. The Ministry of Finance has released a draft of amendment to the Payment and Settlement Act, 2018, proposing stricter conditions for entry.

Under the draft, foreign firms must have operations in at least 10 countries and meet other eligibility criteria defined by Nepal Rastra Bank (NRB) before applying for license.

“Foreign entities established abroad and operating payment services in at least 10 countries, while fulfilling the criteria set by the central bank can submit application for license. If deemed appropriate, the bank may grant permission under specified conditions,” the draft states.

The existing law does not explicitly regulate approvals for foreign firms. However, NRB has already licensed China’s UnionPay International, Singapore’s Visa Worldwide, and Mastercard Asia to operate payment services in Nepal.

In 2022, NRB issued a policy outlining licensing procedures for payment service providers. That policy eased requirements for foreign companies regarding paid-up capital, staffing, among other criteria. However, applicants were required to submit documents including company registration certificates, ownership and beneficiary details, countries of operation, profiles of senior executives, and financial reports for the past three years.

The new draft further allows NRB to call for applications to test new types of payment services under controlled conditions. The central bank is preparing to introduce a regulatory sandbox to safely trial innovative financial products. Provisions for such a mechanism have now been included in the Act itself.

The proposed amendment also seeks to expand NRB’s role in payment and settlement regulation. Currently, disputes are overseen by a committee chaired by a joint secretary of the Ministry of Finance. The draft proposes shifting this role to a committee led by NRB’s Deputy Governor.

Additionally, licensed payment service providers will be required to refund customer balances within 30 days if their license is not renewed. In cases of insolvency, business transfer and settlement procedures must be completed before bankruptcy-related laws take effect.

The Ministry of Finance said the bill has been drafted in line with the government’s announcement in the current fiscal year’s budget to modernize NRB-related legislation. Stakeholders have been given 10 days to provide feedback on the proposed provisions.