Nepal Rastra Bank Introduces SIPS Framework to Strengthen Payment Systems
3rd September 2025, Kathmandu
Nepal Rastra Bank (NRB), the central bank of Nepal, has introduced a crucial new regulatory measure by issuing the “Framework for Identifying Systemically Important Payment Systems (SIPS).”
NRB Introduces SIPS Framework
This decisive action comes at a pivotal moment, as the country’s digital payment ecosystem is experiencing explosive growth, making it essential to bolster its security, resilience, and oversight. The framework is a key step towards formalizing the supervision of critical financial infrastructure and mitigating the systemic risks that have emerged with the rapid expansion of digital transactions.
The Rationale Behind the Framework: Addressing Systemic Risk
Nepal has witnessed an unprecedented surge in electronic payments in recent years, driven by the widespread adoption of mobile wallets, QR code transactions, and online banking services. While this digital transformation has brought immense convenience and promoted financial inclusion, it has also introduced significant systemic risks, particularly for large-value and time-critical transactions. A disruption or failure in a widely used payment system could trigger widespread financial instability, impacting not only financial institutions but the entire economy. Recognizing this vulnerability, NRB had already indicated its intention to identify and regulate systemically important payment systems in the Monetary Policy for Fiscal Year 2081/82. The new SIPS framework is the concrete implementation of that commitment.
What Defines a SIPS?
According to NRB, a Systemically Important Payment System (SIPS) is a critical component of the financial infrastructure whose stability, reliability, and security are essential for the overall economy. Such systems typically handle a large volume and value of transactions, and their failure could lead to extensive financial contagion. The new framework provides clear, objective criteria for identifying these systems, including:
Dominance in the Market: A payment system that handles a significant share of the total transaction value or volume in the retail or wholesale markets.
Time-Critical and Large-Value Transactions: Systems that are essential for the timely and efficient settlement of high-value payments.
Interconnectivity: Systems that have a high degree of interdependence with other payment systems and financial institutions.
This systematic identification process allows NRB to focus its regulatory resources on the most critical components of the payment ecosystem, ensuring they meet the highest standards of security and operational resilience.
Key Objectives and Expected Impact
The SIPS framework is designed to achieve a number of vital objectives aimed at strengthening Nepal’s digital financial infrastructure. Its primary goals include:
Risk Management: Bringing SIPS operators under strict regulatory oversight to ensure that they properly manage operational, liquidity, and cybersecurity risks. The framework mandates the implementation of robust protocols, including disaster recovery plans, to protect against fraud and technical failures.
Operational Continuity: Ensuring that critical payment systems have strong resilience and backup mechanisms to prevent disruptions. The continuity of these systems is crucial for preventing a ripple effect that could paralyze the financial sector.
Transparency and Governance: Enhancing accountability and transparency in the operations of designated payment systems. The framework requires these systems to have sound governance structures and clear rules for participation and risk management.
Alignment with Global Standards: The framework brings Nepal’s regulatory approach closer to international best practices, such as the Principles for Financial Market Infrastructures (PFMIs) set by the Bank for International Settlements (BIS) and the Committee on Payments and Market Infrastructures (CPMI).
For Nepal, the introduction of this framework is a significant step forward. It will foster greater trust among businesses and consumers in using electronic payment platforms, knowing that high-value transactions are handled with heightened security. It also provides NRB with a clear and effective mechanism for supervising a rapidly evolving sector, ensuring that financial innovation is balanced with stability.
Impact on Stakeholders
The new framework will have a direct impact on various stakeholders across the financial ecosystem:
Banks and Financial Institutions: These entities, particularly those operating or participating in designated SIPS, will be required to comply with stricter risk management and reporting standards. This may necessitate significant investments in technology, security infrastructure, and governance frameworks.
Payment Service Providers (PSPs): Operators of popular digital wallets and payment switches may fall under the SIPS designation. They will need to upgrade their technology and governance to meet the new regulatory requirements, which will ultimately benefit their users through enhanced security and reliability.
Consumers and Businesses: These groups are the primary beneficiaries of the new framework. They will gain greater confidence in the security and reliability of digital payment platforms, encouraging a broader shift away from cash and toward electronic transactions.
Regulators: NRB gains a powerful new tool for identifying, supervising, and mitigating risks associated with the country’s most critical payment systems. This enhanced oversight is crucial for maintaining financial stability in a digital-first economy.
Conclusion
With the issuance of the SIPS Framework, Nepal Rastra Bank has taken a vital, forward-looking step toward securing and streamlining the nation’s payment ecosystem. By establishing clear criteria for identifying systemically important payment systems and bringing them under enhanced regulatory oversight, the central bank aims to proactively manage systemic risks, promote transparency, and ensure the sustainable growth of digital finance. As electronic transactions continue their upward trajectory, this framework will be instrumental in safeguarding high-value payments, strengthening public trust, and aligning Nepal’s financial infrastructure with international standards, thereby paving the way for a more robust and resilient digital economy.
For More: NRB Introduces SIPS Framework
