KATHMANDU, June 7: A meeting of the House of Representatives (HoR) held on Thursday approved the Banks and Financial Institutions Bill 2024, the first amendment to the Banks and Financial Institutions Act (BAFIA) 2017.
The lower house has approved the important bill that envisions regulating the country’s crucial financial market in the past two and a half months after it was tabled in parliament. The bill that received the Cabinet’s approval on February 8 was tabled in the lower house on March 18.
The revised BAFIA has incorporated a number of provisions including granting conditional validation to digital currencies and maintaining an age bar of 70 years for an individual to be board member of any bank and financial institution (BFI).
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While the existing BAFIA has set the maximum term for chief executive officers (CEOs) of BFIs, there was not any limit on the terms for the board of directors. The new proposed act talks about maintaining an age bar for the board of directors.
The new bill has envisioned bringing into circulation digital currencies. Nepal Rastra Bank (NRB) will issue the digital currencies while the central bank can issue licenses to other entities to work as a digital bank. Based on the NRB’s guidelines, the designated digital bank will be delegated authorities to accept deposits, provide loans and carry out other financial transactions related to digital currencies.
The new bill also considers reducing the limit of an individual to hold a stake of BIFs to one percent from the existing two percent of the paid up capital of the BFIs concerned.
The proposed new BAFIA has also defined the concept of collateral for the first time. Any asset provided to a BFI as a security while taking a loan is considered as collateral, the proposed new act says.
If the bill is approved in its existing form, microfinance institutions will have to issue primary shares also to their borrowers. In this case, the limit is set at 40 percent of the offerings of the microfinance allocated for the general public.
The bill has also proposed barring an individual board member from assuming a position in more than one BFI. A board member cannot stay in the position for more than two terms.
Likewise, a BFI’s board member must be a master’s degree holder. The required work experience of the board member has been increased to five years from three years.
Parliament has set a deadline of 72 hours for the lawmakers to forward their notes if they wish to file any further revision to the approved bill. Following the completion of the process at parliament, the bill will be taken to the parliamentary Finance Committee for a discussion.
