Kathmandu— Nepal’s Finance Minister Dr. Swarnim Wagle has advocated for amending the Bank and Financial Institution Act (BAFIA) to explicitly address the disqualification of directors within banks and financial institutions, rather than relying solely on regulations within the Nepal Rastra Bank Act. During discussions on the Nepal Rastra Bank (Third Amendment) Bill before the Finance Committee of the House of Representatives, Wagle explained that clarifying these rules within BAFIA would prevent legal contradictions and ensure effective enforcement. The Ministry of Finance has already proposed amendments to the Ministry of Law, Justice, and Parliamentary Affairs to address this issue, focusing on Section 18(1)(m) of BAFFIA which currently outlines director disqualification criteria.

Need for Legislative Clarity

Wagle emphasized that placing disqualification rules solely within the Nepal Rastra Bank Act creates a potential disconnect with commercial banks and complicates enforcement. “Even if it is written in the Nepal Rastra Bank Act, it becomes ineffective if the commercial banks do not address it,” he stated, explaining the need for direct inclusion in BAFIA to streamline regulations and avoid reconciliation issues. The Ministry of Finance has initiated a process to amend Section 18(1) (m) of BAFFIA through a bill amending certain Nepal acts.

Supreme Court Ruling Raises Concerns

Members of the Finance Committee, including Chairman Krishnahari Budhathoki, raised concerns that recent Supreme Court decisions could broaden disqualification criteria to include individuals who have received reprimands. This expanded interpretation, they argued, could create significant challenges within the banking sector and necessitate a comprehensive review of existing regulations. The committee members agreed that amendments should be made not only through the central bank act but also directly within BAFIA.

Amendment Process Underway

A representative from the Ministry of Law, Justice, and Parliamentary Affairs confirmed that the process of amending the relevant bill and incorporating provisions into BAFIA is currently in progress. The Finance Committee continues to hold clause-by-clause discussions on the Nepal Rastra Bank (Third Amendment) Bill, 2083, with a focus on ensuring clarity and consistency in banking regulations.

The committee’s ongoing deliberations suggest that amendments to BAFIA are likely to proceed, aiming to provide a more robust legal framework for director disqualification in the Nepali financial sector.

(With inputs from RN)

Originally published on abcnews.com.np.