Finance Ministry Proposes Additional Independent Directors to Strengthen NRB Autonomy

The Ministry of Finance has prepared a draft bill to amend the Nepal Rastra Bank (NRB) Act, proposing the appointment of additional independent directors in a move aimed at strengthening the central bank’s autonomy amid continued calls from the International Monetary Fund (IMF) and other international agencies for greater institutional independence.

The draft bill, made public on Friday for feedback from stakeholders, retains the provision that the Finance Secretary will serve as an ex-officio member of the NRB Board of Directors. The IMF had earlier recommended removing the Finance Secretary from the board, arguing that the arrangement could invite government interference in the central bank.

Instead of removing the Finance Secretary, the government has sought to address IMF concerns by increasing the number of independent directors. Strengthening NRB’s autonomy through amendments to the NRB Act is also a condition under the IMF’s Extended Credit Facility (ECF).

The ministry has proposed expanding the NRB Board from seven to nine members. Currently, the board, chaired by the Governor, comprises the Finance Secretary, two Deputy Governors and three members appointed by the government.

Under the proposed amendment, the number of government-appointed non-executive independent directors would be increased to five, with representation from different sectors.

The draft also proposes that at least four directors must be present to meet the quorum requirement, including a mandatory presence of at least two independent directors.

The draft bill introduces new eligibility criteria. Except for the Finance Secretary, officials and employees of government bodies and public enterprises would be ineligible to serve as NRB directors.

Similarly, employees of the central bank—other than the Governor and Deputy Governors—would be barred from appointment as directors until three years after retirement.

In its public notice, the Ministry of Finance stated that the bill aims to further strengthen the central bank’s functional autonomy and clarify its objectives and jurisdiction.

The draft amendment also expands the definition of financial institutions to include companies established to provide loans for economic purposes or to collect deposits from the general public.

It incorporates digital holding companies, cooperatives, digital banks, remittance service providers, and institutions operating digital payment systems or services. Digital banks and digital currency are also included in the proposed legal framework.

Although the government and NRB had earlier announced plans in annual policy statements and budgets to establish digital banks, licences have not been issued due to the absence of a legal framework.

Stakeholders have been invited to submit their feedback on the draft bill within seven days.

The proposed amendment also introduces a new provision requiring the Governor to obtain government approval before undertaking foreign visits. The existing Act does not contain such a requirement.