NRB paves the way for MFIs to apply for payment service provider license
KATHMANDU, Oct 3: Microfinance institutions (MFIs) will now be allowed to provide payment service through electronic means, payment cards and mobile wallet.
Issuing a circular on Tuesday, Nepal Rastra Bank (NRB) paved the way for the ‘D’ class financial institutions to get the license for becoming payment service providers (PSP).
Before this, the NRB used to issue license only to ‘A’ class commercial banks, ‘B’ class development banks and ‘C’ class finance companies as well as those companies who have been providing such services. Now, the central bank has made microfinance development banks eligible to acquire license of PSP.
MFIs agree to return Rs 1.60 billion that they had collected in...
PSPs are those institutions that carry out domestic money transfer business or pay bills of both goods and services or provide payment related services or provide payment activities through electronic means.
There are 65 microfinance development banks in the country. Of them, only two -- Nirdhan Utthan Laghubitta Bittiya Sanstha Ltd and Chhimek Laghubitta Bittiya Sanstha Ltd -- have met the paid-up capital requirements to get the PSP license as of mid-July, shows the NRB data.
However, the central bank has fixed some criteria for microfinance institutions to become eligible for the PSP license. According to the NRB, microfinance institution with a minimum paid-up capital of Rs 100 million and having at least 20 branch offices are eligible to get the license. Similarly, only the microfinance institution that has customer base (deposit or credit clients) of a minimum of 20,000 can only submit the application for the license of the PSP. Also, microfinance institution interested to acquire the PSP license should be using credible and reliable information technology system, according to the NRB.
To submit the application for PSP, microfinance institution must have secured data center and data recovery site while also ensuring the security of the data of payment card holders. Similarly, such institutions providing payment services must provide SMS Alert services to their cardholder or service users following the completion of any transaction.
NRB officials say that the central bank decided to open the license for microfinance institutions as part of its efforts to increase financial access and promote cash-less economy. “With this new circular, all ‘A’, ‘B’, ‘C’ and ‘D’ class institutions, who are under the central bank’s regulation, can work as payment service provider. This move is aimed at promoting digital finance in the country and cash-less economy,” Ramhari Neupane, a director at the Payment Systems Department at the NRB, told Republica.
Apart from ‘A’, ‘B’ and ‘C’ class BFIs, IME Digital Solution Ltd, which runs IME Pay, and E-Sewa Phone Pay Pvt Ltd, which operates eSewa, have acquired the PSP license from the central bank.
Neupane said that the central bank issues license once eligible institutions meet necessary physical, technological and security infrastructures to provide payment services.
“Along with BFIs, we also license private companies license who want to provide payment services as part of our efforts to promote other negotiable instruments over cash. But, they have to meet certain criteria for that,” he added.
