Nepal (NP)

Licensing, Authorisation & Market Access

Nepal's market-access architecture is anchored in the Payment and Settlement Act 2075 (2019), operationalised through the Payment and Settlement Bylaw 2077 and the Licensing Policy for Institutions that Perform Payment-Related Work 2079. Nepal Rastra Bank licenses two distinct categories: Payment System Operators (PSOs, infrastructure/switching) and Payment Service Providers (PSPs, customer-facing), with a bar on any single entity holding both licence types simultaneously - an exclusivity rule that does not apply to banks and financial institutions, which may hold either or both. This split forces non-bank entrants to make an early architectural choice between infrastructure and customer-facing roles, a choice banks are not required to make.

Capital requirements are tiered by category and, within PSOs, by class: PSO Class A requires NPR 500 million, PSO Class B requires NPR 100 million, and PSPs require NPR 50 million minimum paid-up capital. Foreign investors may own up to 80% of a licensed entity, subject to a minimum FDI contribution of NPR 20 million and case-by-case NRB approval. Together, the licence-category bar and the tiered capital thresholds function as the two principal gatekeeping mechanisms shaping who can enter Nepal's payments market and in what corporate form - a materially more prescriptive market-entry architecture than a single-licence regime, and one that any prospective non-bank entrant must navigate before it can begin operating.

The most consequential horizon issue in this module is a draft NRB Act amendment, now circulating, that would reclassify PSOs and PSPs into the statutory definition of 'financial institutions.' This remains at an early, non-final stage with no confirmed implementation date, but its tax-rate and prudential-regime implications are significant enough that it is treated here as a standing watch item rather than a settled development.

Outlook

The reclassification proposal is the single most important item to track in this module going forward: if it advances, it would fold PSOs/PSPs into a heavier prudential and tax regime historically reserved for deposit-taking financial institutions, materially changing the economics of non-bank market entry. Absent that shift, the current PSO/PSP dual-category structure, capital tiers and foreign-ownership cap are likely to remain the stable baseline against which any new entrant's market-access strategy must be built.

Stablecoins & Digital Money

Nepal maintains one of the most comprehensive private-crypto prohibitions in the region. The ban covers trading, holding, mining, membership, investment, ownership, transfer and promotion of any virtual currency or cryptocurrency, including stablecoins, together with NFTs and DeFi activity, grounded in the Foreign Exchange (Regulation) Act 1962/2019 and several sections of the NRB Act 2058. The prohibition is not merely administrative guidance; it was tested and upheld by the Supreme Court in 2022 (see W7), giving it a judicial durability that distinguishes Nepal's ban from softer, guidance-only restrictions seen elsewhere.

Separately, and without any read-across to the private-crypto ban, Nepal Rastra Bank is exploring a central bank digital currency ('digital rupee') and has appealed for an NRB Act amendment to permit issuance. The programme remains at concept/study stage, with no live retail pilot as of mid-2026 and no confirmed forward pilot date sourced this cycle. It is worth stating plainly what this baseline found no evidence for: a CBDC path, were it to materialise, would not legalise private stablecoins or cryptocurrency - the two tracks are legally and institutionally separate.

Outlook

The crypto/stablecoin ban should be treated as durable and unlikely to shift absent a change in the underlying statutes or a fresh judicial challenge; the 2022 Supreme Court precedent raises the bar for any future legal challenge. The CBDC track is the item to watch, though its concept-stage status and the absence of a confirmed pilot date mean no near-term operational change should be assumed on current evidence.

Payment Corridor Dynamics

Remittances account for roughly a quarter of Nepal's GDP, making corridor dynamics one of the most economically consequential modules in this baseline. Inflows are concentrated in Gulf/GCC corridors (roughly half of transfers, with Qatar alone accounting for 17.7%), India (14.2%) and Malaysia (9.7%). Within this mix, the India-Nepal corridor is already among the cheapest in South Asia, at a 1.9% average transfer cost - a materially lower cost base than Nepal's dominant Gulf corridors, which continue to operate primarily through the 56-plus licensed remittance service providers governed by the Remittance Bylaws 2023 approved-country list.

The defining development of this cycle is the launch of a direct, real-time UPI-NPI linkage between India and Nepal, built via Nepal Clearing House Limited and NPCI International, which went live 6 June 2026 with a select group of participating banks (formal announcement following 9-10 June). This is a structural shift rather than an incremental one: it moves P2P remittance settlement on the corridor away from correspondent-banking-dependent processing and toward real-time, API-based transfer.

Outlook

The key variables to track are the pace at which participating banks expand beyond the initial select group, transaction-volume growth on the new rail relative to existing correspondent-banking-based remittance flows, and whether a comparable real-time linkage is pursued with any of Nepal's larger-volume Gulf corridors. Absent such an extension, the Gulf corridors - which carry the largest share of inflows - will likely continue to rely on conventional remittance-service-provider channels for the foreseeable future.

AML/CFT & Financial Crime

This module is sourced from the Sentinel.gi feed and is carried here as payments-sector context rather than original WPM illicit-finance analysis. FATF placed Nepal under increased monitoring (grey list) effective 21 February 2025, alongside Lao PDR. Nepal remains on the grey list as of the June 2026 plenary with a 6-point action plan outstanding, marking its second grey-listing after an earlier 2008-2014 stint. On the reporting-framework side, FIU-Nepal's STR/SAR Guidelines, updated July 2025, explicitly cover PSPs/PSOs as reporting entities, and under a 2024 amendment to the ALPA, the FIU may fine up to NPR 10 million for STR non-compliance - extending Nepal's AML reporting regime formally into the non-bank payments sector.

Outlook

The pace and substance of Nepal's progress against its outstanding 6-point FATF action plan is the central variable for this module and, by extension, for the correspondent-banking pressures documented in W12. For payments-sector readers, the relevant illicit-finance detail and any forward FATF-plenary developments should be tracked via the Sentinel.gi feed and, where applicable, FIM's own reporting; this module's role is limited to identifying the payments-sector consequences of that status, not to independently assessing AML/CFT risk.

Conduct, Safeguarding & Financial Promotions

Nepal's approach to customer-fund protection departs structurally from the segregation/trust-account model common in more developed payments markets. Rather than requiring licensed PSPs to ring-fence customer funds in a dedicated trust or segregated account, the regime requires PSPs to enter a formal settlement-bank agreement for clearing/settlement before commencing operations, and this arrangement functions as the core customer-fund-protection mechanism in lieu of a dedicated segregation regime. In practice, this means the protection of customer balances is mediated through the commercial relationship between a PSP and its settlement bank, rather than through a standalone legal segregation requirement enforceable independently of that banking relationship.

This is flagged in this baseline as a structural safeguarding gap relative to jurisdictions - the UK and EU among them - that mandate dedicated client-money segregation or trust arrangements as a condition of e-money or payment-institution licensing. It is not, on the evidence available this cycle, a gap that has produced a documented consumer-harm event; it is a structural design characteristic of the Nepali regime rather than an active incident.

Outlook

Watch for whether any future NRB rulemaking - potentially bundled with the pending NRB Act reclassification exercise - moves toward a more formal segregation or trust requirement for PSP-held customer funds. Absent such a move, the settlement-bank-agreement model is likely to remain the operative safeguarding mechanism, and counterparties assessing Nepali PSPs should treat the strength of a given PSP's settlement-bank relationship, rather than a standalone legal segregation guarantee, as the relevant customer-protection variable.

Operational Resilience & Critical Infrastructure

Nepal's operational-resilience regime is anchored in NRB's Cyber Resilience Guidelines 2023, enforced since August 2023, which require vulnerability assessments, penetration testing, red-team exercises, disaster-recovery sites, and mandatory biennial system audits for all licensed PSPs/PSOs and BFIs, aligned to BIS Principles for Financial Market Infrastructures. This is a substantive baseline requirement set, placing recurring, independently-verifiable resilience testing obligations on both bank and non-bank payments entities.

The regime has continued to extend rather than stand still: a Systemically Important Payment Systems (SIPS) framework issued in September 2025 adds a systemic-risk identification layer on top of the existing cyber-resilience baseline, and AI-specific incident-reporting guidelines issued in December 2025 extend the resilience regime to cover artificial-intelligence-related operational risk - an area few comparable emerging-market payments regulators have yet formally addressed.

Outlook

This module is trending toward tighter, more codified oversight rather than looser enforcement. The SIPS framework's practical bite will depend on which payment systems NRB formally designates as systemically important; that designation process, once it produces named outcomes, is the next concrete data point to track for firms assessing their own resilience-compliance exposure in Nepal.

Scheme & Network Compliance

Nepal's scheme landscape has historically been fragmented across multiple closed-loop QR and card schemes operated by different providers, including Fonepay, SCT and Nepal Payment Solutions. NRB's structural response has been twofold: the NepalQR Standardization Framework mandates EMVCo 4.3-based QR specifications across scheme operators, and the National Payment Switch is being built out to consolidate interoperability across this multi-scheme landscape. The direction of travel here is consolidation rather than continued fragmentation, with NRB acting as the active architect of interoperability rather than leaving it to individual scheme operators to negotiate bilaterally.

A further scheme development this cycle is the international extension of the domestic NEPALPAY card scheme, which is being extended to international acceptance through the Discover Financial Services (DFS) network - the first instance of a Nepali domestic card scheme securing cross-border network acceptance of this kind.

Outlook

The consolidation trajectory here is well-established and is likely to continue; the National Payment Switch build-out is the structural project to track, since its completion would materially reduce the fragmentation costs currently borne by merchants and consumers navigating multiple closed-loop schemes. The NEPALPAY-Discover extension is worth monitoring for whether it is followed by further international-network tie-ups for other domestic Nepali schemes.

Industry Structure & Commercial Dynamics

Nepal's digital-wallet market has long been dominated by eSewa, which holds an estimated 70% wallet market share. The most significant structural response to that dominance came in 2025, when IME Pay and Khalti merged to form IME Khalti, a consolidation explicitly aimed at challenging eSewa's position and approved under NRB's revised Transaction and Settlement Bylaw 2077, which permits wallet-provider consolidation. The merger predates this cycle's trailing-twelve-month commercial-event window for W13 purposes but is recorded here as the market-structure context against which any current or future wallet-sector commercial activity should be read.

Outlook

The key question for this module is whether IME Khalti's combined scale translates into a durable erosion of eSewa's share, or whether eSewa's incumbency advantage proves resilient to a single competitor-merger response. Any further wallet-sector consolidation, or a competitive response from eSewa itself, would be the next material development to track in this module.

Legal & Litigation

The key litigation anchor for Nepal's payments and digital-asset regime remains the Supreme Court's 2022 dismissal of a Public Interest Litigation that had challenged NRB's crypto-ban notice; the Court held that NRB acted within its statutory competence under specific sections of the NRB Act. This precedent underpins the durability of the crypto/stablecoin ban discussed in W2 and forecloses, absent a change in the underlying statute, straightforward domestic legal challenges to that prohibition.

On the enforcement side, NRB's supervisory record shows active use of its licensing powers against non-bank PSPs. In FY2023/24, NRB dismissed the licences of Mohar Digital Pvt. Ltd. and E-net Payment Pvt. Ltd., and froze the accounts of Paywell Nepal Pvt. Ltd. and Sajilo Pay Payment Services Pvt. Ltd. for non-compliance. This is a demonstrable data point on NRB's willingness and capacity to act against licensed non-bank entities, not merely a paper-based supervisory framework.

Outlook

Both threads point toward continuity rather than change: the 2022 precedent is settled and unlikely to be revisited absent new legislation, and the FY2023/24 enforcement actions suggest NRB will continue to exercise active supervisory discretion against non-compliant non-bank PSPs. Firms operating in or servicing this market should treat NRB's demonstrated enforcement willingness as a standing feature of the operating environment.

Merchant Acquiring & Risk

The E-commerce Act 2081 requires online sellers to use NRB-licensed payment gateways or methods, with fines of NPR 50,000 to 300,000 applying for breaches, including unregistered operation or unresolved consumer complaints. This is a structural constraint on merchant-acquiring economics for online sellers in Nepal: it effectively forecloses the use of unlicensed or informal payment-collection arrangements for e-commerce, channelling all online merchant acquiring through NRB-licensed gateway infrastructure.

Outlook

This is a stable, established requirement rather than an area of active change this cycle. The item to watch is enforcement intensity - specifically, whether NRB or e-commerce regulators begin publishing enforcement data on gateway-licensing breaches in a manner comparable to the licence-dismissal and account-freeze actions already documented in W7 for non-bank PSPs.

Product Innovation & Market Development

The standout product development this cycle is the Fonepay-NIPL partnership, which enables Indian UPI users to pay Nepali merchants via QR with instant INR-to-NPR conversion, described in reporting as the first full-scale commercial UPI person-to-merchant deployment outside India. This is distinct from, but complementary to, the bank-channel UPI-NPI person-to-person linkage covered in W5: together, the two initiatives give the India-Nepal corridor both a consumer remittance rail and a merchant-acceptance layer running on real-time infrastructure.

Outlook

The key indicator to track is merchant-adoption breadth for the Fonepay-NIPL UPI acceptance product - specifically, how far it extends beyond early-adopter merchants into mainstream retail and tourism-sector acceptance, given Nepal's reliance on Indian visitor and remittance-linked commerce.

Consumer Protection & APP Fraud

No dedicated mandatory APP-fraud reimbursement scheme akin to the UK PSR model was identified for Nepal this cycle. Cyber-enabled fraud response instead runs through Nepal Police's Cyber Bureau and FIU-Nepal's STR/SAR analysis - an investigative and reporting-based response model rather than a bank-liability redress framework that would compel reimbursement to defrauded customers. This represents a consumer-protection gap relative to the Anglosphere and EU norm of mandatory or presumptive APP-fraud reimbursement, though it should be read as a structural feature of the current regime rather than evidence of any specific unaddressed fraud episode.

Outlook

This is an area flagged in this baseline as under-indexed relative to more developed redress regimes, and it is the kind of gap that tends to attract regulatory attention only after a high-profile fraud episode. Absent such a trigger, no near-term move toward a mandatory reimbursement scheme should be assumed; the current investigative/STR-based response model is likely to remain the operative consumer-recourse channel.

Correspondent Banking, Settlement & Access

The analytical spine of this module is the structural asymmetry between bank and non-bank access to international settlement infrastructure: because foreign banks cannot branch directly inside Nepal, every Nepali commercial bank's cross-border capability - and, indirectly, every non-bank PSP that relies on a bank for settlement - depends on correspondent-banking relationships with foreign banks. Nepal's FATF grey-listing has intensified correspondent-bank de-risking pressure, with heightened due diligence and expanded documentation requirements now attached to correspondent and trade-finance relationships. This is a direct commercial consequence of the W11 grey-listing rather than an independent development, and it is the primary channel through which AML/CFT status translates into day-to-day payments-sector friction.

Outlook

Correspondent-access conditions are unlikely to ease materially until Nepal makes demonstrable progress against its FATF action plan; in the interim, expect continued elevated due-diligence and documentation burdens on Nepali banks' correspondent relationships, with second-order effects on the cost and speed of trade finance and cross-border settlement more broadly - including, potentially, the settlement arrangements underpinning newer real-time corridor infrastructure such as the UPI-NPI link covered in W5 and W13.

Commercial Intelligence (M&A, Investment & Product)

The standout trailing-twelve-month commercial event for Nepal is the India-Nepal UPI-NPI cross-border real-time payment link, a product launch jointly credited to NPCI International Payments Ltd and Nepal Clearing House Limited. The link went live 6 June 2026, enabling instant P2P transfers via Virtual Payment Addresses rather than correspondent-banking rails that typically take 1-3 business days. Deal terms were not publicly disclosed for this product launch. This is classified here as a discrete commercial/product event distinct from the structural corridor analysis carried in W5, though the two are naturally read together.

Outlook

Given the product's early-stage rollout with a select group of participating banks, the next commercial-intelligence milestones to track are formal participating-bank expansion announcements and any parallel product announcements extending similar real-time linkages to other Nepali corridors.