PAYMENT SYSTEM IN NEPAL 1 Short Glimpse about

PAYMENT SYSTEM IN NEPAL 1

Short Glimpse about Nepal • Federal Democratic Republic of Nepal • • Land locked & least developed country. Area: 147, 181 Sq. km Population: 28. 8 million(mid July 2017) GDP: USD 24. 47 Billion Per capita : USD 1004 Inflation : 4. 00 percent (Source: National Economic survey 2016 -17 2

LEGAL AUTHORITY • Nepal Rastra Bank-Central Bank of Nepal is mandated by Nepal Rastra Bank Act 2002 as an authority responsible for the regulation and supervision of Banks and Financial Institutions & payment system. • NRB is mandated by NRB Act 2002 for development of secure, healthy, and efficient payment system in the country. 3

Financial system overview • Banks and financial institutions are licensed under four categories by NRB Categories Bank Total branch (Mid Jan 2018) “A” Commercial bank 28 2919 “B” Development bank 33 951 “C” Finance Company 25 183 “D” Microfinance 65 - Total BFIS 151 4053 • Other Institutions (10) which are licensed by NRB 4

Financial system overview S. N. Company No. 1. Employee Provident fund 1 2. Citizen Investment Trust 1 3. Postal Savings Bank 1 4. Life Insurance Companies 18 5. Non life Insurance companies 20 6. Reinsurance company 1 7. Savings and Credit cooperatives 3200 Regulated by Nepal Government Insurance Board Cooperative board • Nepal Stock Exchange Company(229 companies listed for trading ) supervised by security Board of Nepal 5

Financial system overview S. N. Company No. Regulated by 1. Payment System Operator 3 2. Payment Service provider 36 Regulated and supervised by NRB Total 39 6

Financial access as on Mid June 2018 S. N. Particular “A” “B” “C” Total 1. No. of Branches 2919 951 183 4053 2. No. of Branchless Banking Centres 1289 - - 1289 3. No. of Branchless Banking Customers ( In Lakh) 1. 89 4. No. of Deposit Accounts (In lakh) 9. 38 3. 13 0. 36 12. 87 5. No. of Loan Accounts (In lakh) 183. 67 36. 66 4. 67 225. 00 6. No. of Mobile Banking Customers 36. 45 3. 35 0. 20 40. 00 (In lakh) 7

Financial access as on Mid June 2018 S. N. 7. 8. 9. 10. 11. Particular “A” “B” “C” Total No. of Internet Banking Customers ( In Lakh) 7. 67 0. 14 0. 03 7. 84 No. of ATMs 2420 173 31 2624 No. of Debit Cards( In Lakh) 49. 83 1. 94 0. 31 52. 08 No. of Credit Cards ( In Lakh) 0. 97 0. 28 - 1. 25 No. of Prepaid Cards( In Lakh) 0. 97 - - 0. 97 8

Payment Systems in Nepal • Major payment instrument: • Cash: First and common mode of payment, cash is king concept. • CHEQUES: Cheques are Second common instrument for payment. To facilitate online quick settlement of cheques among BFIs, Electronic cheque clearing has been introduced with establishment of Nepal clearing house Ltd. (NCHL-ECC). • It enables clearing of cheques on same day irrespective of location of BFIs branches. ECC & Ips are major tools for clearing & settlement. • Cards: Debit Cards, Credit Cards, e payments are also used lately. 9 Debit cards are most popular among users.

Payment system overview • Mobile banking : with Increasing access to mobiles (currently approx 80 %) mobile banking is also growing. Facilities include intra bank fund transfer, balance enquiry, mini statement, utility bill payments etc. • Internet Banking : BFIs are increasingly providing this facility to their customers. • ATM : Total number of ATM are 2624 • Branchless banking: Effective tool for rural and semi urban areas. As of mid June 2018, 1289 branchless centers and 1, 89, 358 customers. 10

Existing Law, Policies and Guidelines Bylaws • Payment and settlement Bylaw, 2015 (including second amendment 2017) Policies, Guidelines • Licensing policy for Payment related Institutions 2016 • Payment system Oversight Framework 2018 Other • National Payment System Development Strategy, 2014 Directives • Electronic retail payment threshold • Security features in electronic payment tools • Retail payment transaction threshold 11 • Online banking & Settlement bank

NRB Strategic plan (2017 -2021) Nepal Rastra Bank strategic plan (2017 -2021) • NRB aims at gradually moving towards cashless society by facilitating various instruments of electronic payments in a safe, secured and efficient manner. • Effective payment system enhances the stability of the financial sector, reduces transaction costs in the economy, promotes the efficient use of financial resources , improves market liquidity and facilitates effective implementation of monetary policy. NRB aims at increasing the effectiveness of payment through (i) strengthening payment and settlement legal framework and regulatory mechanism, (ii) introducing Real Time Gross Settlement (RTGS) for large value payment and (iii) establishing National Payment Gateway (NPG) and National Payment Switch (NPS) 12

Recent Developments • Establishment of dedicated Payment systems department. (PSD) • PSD is involved in establishing legal infrastructure for regulation of payment system in country. • Payment and settlement Act forwarded to parliament for necessary approval. • To facilitate interbank payments, Nepal clearing house has launched Interbank payment system (NCHL-IPS) on 17 th August 2016. • It is web based interbank solution to facilitate domestic fund transfer between accounts maintained at different BFIs. • IPS introduced for prompt inter-bank payment. 13

Future course • Inter department task force headed by PSD has been formed to study modernization of domestic payment infrastructure such as Real time Gross Settlement (RTGS), Central Security Depository, Retail Payment System and National Financial Switch is required to give time frame for implementation. • Development of Modern, Effective and dynamic payment system in Nepal is Future agenda. • Development of effective oversight framework and other regulations will help ensure effective payment system in Nepal. BFIs as well as other payment related agencies will also be subject to effective supervision. • Cross boarder Cooperation in these areas expected. 14

Thank You 15