Financial Services Regulation in Nepal: NRB, SEBON & BAFIA Guide

BAFIA stands for the Banks and Financial Institutions Act, 2073 (2017). It is the primary law governing all banks and financial institutions in Nepal. BAFIA classifies BFIs into four categories (Class A: Commercial Banks, Class B: Development Banks, Class C: Finance Companies, Class D: Microfinance), establishes licensing requirements, and defines prudential norms and depositor protection.

As of mid-2024, Nepal has approximately 107 licensed banks and financial institutions: 20 commercial banks (Class A), 17 development banks (Class B), 17 finance companies (Class C), and 52+ microfinance institutions (Class D). This number has been consolidated from over 200 through NRB-mandated mergers.

SEBON is the Securities Board of Nepal, the apex regulatory authority for Nepal’s capital market. Established in 1993 under the Securities Act 2063, SEBON regulates securities issuance (IPOs, rights issues, mutual funds), licenses stockbrokers and merchant bankers, monitors trading on NEPSE, and enforces disclosure and corporate governance standards.

Insurance companies in Nepal are regulated by the Nepal Insurance Authority (NIA), formerly the Insurance Board, under the Insurance Act 2079 (2022). As of mid-2024, NIA licenses and supervises 37 insurance companies: 14 life insurance, 14 non-life insurance, 2 reinsurance, and 7 micro insurance companies.

Under BAFIA 2073, the minimum paid-up capital varies by class: NPR 8 billion for Class A (commercial bank), NPR 2.5 billion for Class B (development bank), NPR 800 million for Class C (finance company), and NPR 30–120 million for Class D (microfinance, depending on district/regional/national scope).

Foreign direct investment in Nepal’s financial sector requires prior NRB approval and must comply with BAFIA, the Foreign Investment and Technology Transfer Act (FITTA) 2075, and NRB foreign exchange rules. Foreign ownership limits apply, and profit repatriation must follow NRB forex procedures.

Nepal’s BFIs must maintain a minimum Capital Adequacy Ratio (CAR) of 11%, aligned with Basel III standards. NRB monitors CAR through regular supervisory reporting and can take corrective action if a BFI falls below the required threshold.

You can file a complaint with NRB’s Financial Consumer Protection Division (FICPD). In FY 2023/24, FICPD resolved 3,430 of 3,977 complaints received. For insurance complaints, contact the Nepal Insurance Authority. For capital market issues, contact SEBON. Visit nrb.org.np for the complaint process.

All financial institutions must comply with the Asset (Money) Laundering Prevention Act, 2064 (2008). Requirements include mandatory KYC (Know Your Customer) procedures, suspicious transaction reporting, customer due diligence, record keeping, and appointment of compliance officers. Non-compliance can result in penalties and license revocation.

In 2025, NRB introduced the Framework for Domestic Systemically Important Banks (D-SIBs), identifying Nepal’s 10 largest and most interconnected banks for stricter oversight. The framework, aligned with Basel Committee standards, requires D-SIBs to maintain additional capital buffers and enhanced risk management to prevent systemic failure.

NEPSE is Nepal’s sole securities exchange, regulated by SEBON. It provides the platform for buying and selling shares, debentures, and mutual fund units. Trading happens through licensed stockbrokers. Investors need a DEMAT account through the Central Depository System (CDS) and an ASBA (Application Supported by Blocked Amount) account for IPO applications.

Savings and credit cooperatives are registered under the Cooperative Act, 2074 (2017) and supervised by the Department of Cooperatives. They provide financial services to members, particularly in areas underserved by formal banks. Cooperatives operate under a separate regulatory framework from BFIs and are not licensed by NRB.

According to NRB’s Financial Stability Report, insurance coverage in Nepal reached 44.38% of the population in FY 2022/23. The sector comprises 37 companies including life, non-life, reinsurance, and micro insurance, all regulated by the Nepal Insurance Authority under the Insurance Act 2079.

During divorce proceedings, financial assets held in banks, insurance policies, investment portfolios, and provident funds are subject to property division. Courts can order disclosure of all financial holdings. Contact our divorce lawyer for asset tracing guidance.