Last week, Nepal Rastra Bank came up with a shocking directive as it ordered Laxmi Sunrise Bank to shut down its fully digital banking platform ‘OrangeNXT’. This was Nepal’s only digital-only banking service operated for the past one and a half years in collaboration with F1Soft. The “digital-only bank” is a kind of bank that operates entirely online without any physical branches. The central bank suspended the platform citing the absence of regulatory provisions for digital-only banks and even went as far as to say the service was running without a proper legal framework. To me, this decision is nothing short of regressive. At a time when Nepal’s smartphone and internet penetration is at its peak, the central bank should be promoting innovation and paving the way for neo-banking, not pulling the plug on a forward-looking initiative.
Contradictory step
While presenting the annual budget for the current fiscal year, Finance Minister Bishnu Prasad Paudel announced the government’s plan to establish a fully digital bank within one year. A year earlier, then Finance Minister Dr Prakash Sharan Mahat made a similar promise, saying the government was working to set up a ‘neo bank’ as part of Nepal’s broader digital economic transformation. Even before that, then Finance Minister Janardan Sharma had committed to creating the necessary legal and institutional framework to establish such a bank.
In line with these commitments, Nepal Rastra Bank itself had stated in its monetary policy that it would initiate legal and procedural arrangements for the establishment of neo banks to expand financial access. Yet, in a move that directly contradicts its own vision, the central bank has suspended Nepal’s first fully app-based bank.
Also, some three years ago, the central bank had incorporated digital banking into its monetary policy.In its 2022/23 monetary policy, then Governor Maha Prasad Adhikari said that amendments to the Nepal Rastra Bank Act, 2058 and the Bank and Financial Institutions Act (BAFIA), 2073 would be pursued to support the creation of fully digital banks
Why is it wrong? First, a private-sector bank working in line with the government and central bank’s own vision has been shut down instead of being supported. Rather than creating an enabling ecosystem, the regulator chose to stifle innovation. Second, OrangeNXT was being operated with the green signal of the central bank itself. With more than 65,000 customers, the platform was gaining traction, especially among youths abroad, who valued the ability to open accounts even with foreign phone numbers. Cutting it off midway sends a confusing and discouraging message to both users and innovators. Third, the decision risks Nepal falling behind in the regional race for digital banking. Neighboring countries are encouraging fintechs and neo banks to boost inclusion and efficiency. But, Nepal is just losing the track.
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Why Genz loved it
OrangeNXT quickly became a hit among young customers, securing more than 65,000 users within just one and a half years. Most of its customer base was between the ages of 20 and 40—the demographic that is both tech-savvy and eager for hassle-free services. Unlike traditional banks, OrangeNXT eliminated the need for physical paperwork or repeated branch visits. Opening an account was as simple as filling out an online form and completing verification through a quick video call—making the entire process possible within minutes.
Another major attraction was its 24/7 customer care service, something unheard of in Nepal’s traditional banking sector where customer service is limited to office hours. For a generation accustomed to instant responses, this was a game-changer. By the time of suspension, OrangeNXT had already accumulated Rs 150 million in deposits. It was also a blessing for Nepalis living abroad, who could open accounts using their foreign numbers and manage their finances without having to step into a branch back home.
Why digital
The numbers themselves tell the story. In the first three months of the last fiscal year, mobile banking transactions in Nepal totaled around 130.5 million. In the same three months this year, the figure jumped to nearly 180.5 million, a recently published macroeconomic update of the central bank shows. That’s a year-on-year surge of almost 40–45 percent, and it shows banking habits are rapidly shifting to the digital space.
At the same time, Nepal’s digital infrastructure is stronger than ever. Smartphone penetration has reached 72.94 percent, while 4G/LTE services now cover 741 out of 753 local levels. Mobile broadband commands 89.34 percent of the market share, according to the Nepal Telecommunications Authority. With fewer people visiting physical bank branches, this is precisely the moment to accelerate neo banking.
Digital-only banking also reduces the high operational costs of running brick-and-mortar branches, allowing customers to enjoy cheaper, faster, and more efficient services.
Globally, there are plenty of success stories. Not so far, in the southern neighbour, Paytm Payments Bank and RazorpayX have transformed how millions access banking without ever stepping into a branch. In the UK, Monzo and Revolut have grown into household names among young professionals, offering sleek, mobile-first banking experiences. Even closer to home, Bangladesh’s Nagad has become a leading mobile financial service provider.
Nepal, too, was finally catching up with this global revolution. But instead of building on the momentum, the suspension of OrangeNXT feels like the regulator is stepping back rather than leaping forward.
What next?
The suspension of OrangeNXT has left a big question: where does Nepal go from here in its digital banking journey? While the numbers clearly show strong digital adoption, what is missing is a strong regulatory framework that balances both innovation and oversight.
First, Nepal Rastra Bank must move quickly to draft and implement clear guidelines for neo banks. Instead of shutting or suspending services, the central bank should encourage innovation and actively promote digital banking, as promised by both the government and the bank itself.
Second, the government must align its commitments with real actions. For three consecutive years, finance ministers have pledged to establish a fully digital bank. But without a supportive ecosystem, such promises remain rhetoric.
Third, the private sector needs a proper assurance that its efforts will not be cut short midway. Bringing in technology is expensive, and investors will only step in if they see regulatory certainty and a long-term commitment to innovation.
Nepal already has the digital foundation: high smartphone penetration, extensive 4G coverage, and rapid digital adoption accelerated by the pandemic. What is needed now is boldness in policymaking. Rather than closing doors on innovation, the central bank should open them wider and lead Nepal toward becoming a regional pioneer in neo banking.
The author is a second-year Master’s student at the Central Department of Economics, Tribhuvan University.
