Nepal BAFIA 2080 Amendment: Banking Sector Reform, Shareholder Loan Ban, Corporate Governance
11th June 2025, Kathmandu
A significant amendment to the Banks and Financial Institutions Act, 2073 (BAFIA), currently under review by the Finance Committee of the House of Representatives, could reshape Nepal’s banking sector. The amendment, titled BAFIA 2080, proposes stricter rules to separate the roles of bankers and businesspersons.
Nepal BAFIA 2080 Amendment
Ban On Loans To Major Shareholders
The key provision in the proposed amendment prohibits any individual or institution holding 1% or more of a bank’s paid-up capital from borrowing from the financial system. This measure targets individuals who leverage their founder shareholding to access loans, raising concerns about conflict of interest and poor governance.
The goal is to improve transparency and corporate governance in banks by compelling shareholders to choose between being a banker or a businessperson.
Study Reveals 82 Dual-Role Individuals
A study by Capital Nepal found that 88 individuals hold 1% or more founder shares in 14 out of 20 commercial banks. Of these, 82 individuals are actively engaged in business while also maintaining significant shareholding in banks. These dual roles conflict with the proposed legal framework.
Major Banks and Key Shareholders
Everest Bank
Five individuals hold more than 1% of the bank’s 65.3% founder shares. They include Pratima Shrestha (14.77%), Ravikrishna Shrestha (1.88%), and Santadev Shrestha (1.18%). However, these individuals are not actively involved in business.
Machhapuchhre Bank
Nine founder shareholders each hold over 1%, accounting for 48.65% founder shares. All are businesspeople. Notable names include Upendra Mahato Sudi (9.24%) and Premkumar KC (8.14%).
NIC Asia Bank
Fifteen individuals hold a combined 45.23% in founder shares. Leading shareholders like Ashok Agrawal (6.12%) and Trilokchandra Sanghai (5.34%) are also involved in various business ventures.
Sanima Bank
Seven shareholders hold 1% or more, totaling 46.21% of founder shares. They include Arunkumar Ojha (7.94%) and Jeevannath Lamichhane (5.44%), all active in business.
Laxmi Sunrise Bank
Twelve shareholders hold over 1%, collectively owning 42.33% of founder shares. Sharika Khetan (4.17%) and Motilal Dugar (2.77%) are among the top businessperson-shareholders.
Citizens Bank International
Eleven individuals hold 16.97% in total founder shares. They include Urmila Pandey (3.30%) and Bijendra Joshi (1.37%). All are reported to be businesspeople.
Siddhartha Bank
Fourteen shareholders collectively own 26.83% of the founder shares. Major names include Narendrakumar Agrawal (2.95%) and Chiranjilal Agrawal (1.81%), all active in business sectors.
Global IME Bank
Two shareholders, Sumitkumar Agrawal (1.82%) and Bishnuprasad Neupane (1.41%), hold significant shares and are engaged in business.
Prabhu Bank
Gaurav Agrawal holds 2.71% of the bank’s founder shares and is also a businessperson.
Prime Commercial Bank
Umesh Shrestha (2.46%) and Binodchandra Bharal (1.44%) hold significant shares. Umesh is involved in business, while Binod is not currently reported to be active.
Kumari Bank
Three shareholders – Amirpratap Jabara (2.02%), Janukikumari Jabara Shahi (1.30%), and Savitri Gurung (1.20%) – are all involved in business activities.
NMB Bank
Three individuals hold more than 1%: Nandkishore Rathi (1.68%), Dhananjaya Prasad Acharya (1.53%), and Sunil Kumar Ghosali (1.04%). Rathi and Ghosali are businesspeople.
Himalayan Bank
Three shareholders hold over 1% of the bank’s 61.01% founder shares. These include Pradipjung Pandey (1.98%) and Shashikant Agrawal (1.71%), both of whom are businesspeople.
Agriculture Development Bank
Krishnagopal Shrestha holds 1.39% of the shares. He is also a businessperson. The bank remains government-majority owned.
Banks Unaffected By The Amendment
Nepal Investment Mega Bank, Nabil Bank, Nepal SBI Bank, Standard Chartered Bank, Nepal Bank, and Nepal Infrastructure Bank do not have individual shareholders with 1% or more founder shares. Rastriya Banijya Bank is fully government-owned and remains outside the scope of the proposed clause.
Broader Legal Reforms Ahead
The BAFIA 2080 bill also addresses issues such as board structure, related party definitions, electronic transactions, and auditing standards. The Finance Committee’s ongoing deliberations will determine the final draft. If passed, the amendment is expected to strengthen corporate governance, prevent misuse of insider privileges, and bring more clarity to Nepal’s financial sector.
About BAFIA
BAFIA, or the Banks and Financial Institutions Act, is Nepal’s main law for regulating banks and financial institutions. It sets rules for licensing, management, and operation to ensure a stable financial system. The act protects depositors by enforcing strict regulations on how banks handle money and risks. It also guides corporate governance and auditing practices.
Originally passed in 2006 (Nepali year 2063/64), BAFIA has been updated several times. The latest version, BAFIA 2073, covers modern banking needs but continues to evolve. New amendments aim to address issues like conflicts of interest, improve transparency, and support digital banking. Overall, BAFIA plays a vital role in maintaining trust and safety in Nepal’s financial sector. It helps keep banks accountable and protects the economy from risks linked to poor banking practices.
For more: Nepal BAFIA 2080 Amendment
