Banking Laws and Regulations

(a) Types of cyber offences under the Electronic Transactions Act, 2063 (Chapter on offences relating to computers)

1. Piracy, destruction or alteration of computer source code.
2. Unauthorised access to a computer, computer system or data.
3. Damage to a computer, computer programme, data or information system.
4. Publication or display of illegal material (obscene, defamatory or against public morality) in electronic form.
5. Breach of confidentiality of electronic records, books, information or documents.
6. Providing false information or concealing facts to obtain a licence or digital signature certificate; submitting false particulars to the Controller or Certifying Authority.
7. Failure to submit required documents or information to the Controller or Certifying Authority.
8. Computer fraud, i.e. cheating by use of a computer or electronic means.
9. Abetment, attempt or conspiracy to commit these offences.

(b) Challenges of implementing cyber law in Nepal

• Outdated law: the 2063 Act has not kept pace with social media, cryptocurrency, e-commerce and data-protection issues; a dedicated cyber-security and data-protection law is still lacking.
• Weak investigative and forensic capacity: few trained police, prosecutors and judges, and limited digital-forensic laboratories.
• Jurisdiction and cross-border crime: offenders and servers are often abroad, and mutual legal assistance is slow.
• Evidence problems: electronic evidence is easily altered or lost, and its collection and admissibility are difficult.
• Low awareness: many users have little digital literacy, so victims do not report and may not know their rights.
• Institutional gaps: poor coordination among the Police Cyber Bureau, NRB, the Nepal Telecommunications Authority and the IT Department; resources are limited.
• Rapid technological change: new forms of crime appear faster than the law can respond.
• Rights concerns: misuse of provisions against freedom of expression has drawn criticism.

e-Governance: Concept and Challenges in Nepal

1. Meaning of e-Governance (5 marks)

e-Governance (electronic governance) is the application of Information and Communication Technology (ICT) — particularly the internet, computers, mobile networks and digital databases — in the functioning of government in order to deliver public services, share information, conduct transactions and enable citizen participation in a faster, cheaper, more transparent and more accountable manner.

It is not merely the computerisation of government offices; it is a fundamental re-engineering of how the state interacts with citizens, businesses and other arms of government. The World Bank defines e-governance as the use of ICT by government agencies to transform relations with citizens, businesses and other government bodies.

Key features:

• Service delivery: Online issuance of citizenship, passport, licence, land records, tax filing, company registration, etc.
• Information dissemination: Government portals, gazettes, budgets, tenders and policies made publicly accessible.
• Citizen participation: e-participation through online feedback, complaints, consultations and e-voting.
• Transparency and accountability: Reduces discretion, middlemen and corruption; enables tracking of applications.
• Efficiency: Cuts cost, time and paperwork; enables data sharing across agencies (interoperability).

Four major models (Gartner): Government-to-Citizen (G2C), Government-to-Business (G2B), Government-to-Government (G2G) and Government-to-Employee (G2E).

Institutional basis in Nepal: The Electronic Transactions Act, 2063 (2008) gives legal recognition to electronic records and digital signatures; the National Information Technology Policy, 2072 (2015) and the Digital Nepal Framework, 2076 (2019) provide the policy roadmap; the National ID and Civil Registration system, Nagarik App, e-Passport, IRD's taxpayer portal, Company Registrar's online system and Nepal Government's e-Gov Master Plan are practical examples. The Ministry of Communication and Information Technology (MoCIT) is the apex body, supported by the National Information Technology Centre (NITC).

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2. Challenges of e-Governance Implementation in Nepal (5 marks)

a) Digital divide: Wide gap between urban and rural areas, and between literate/affluent and marginalised groups. Internet penetration and smartphone ownership remain low in remote districts of Karnali, Sudurpaschim and the hills; women, Dalits, Janajatis and the elderly are further excluded. Without bridging this divide, e-governance excludes the very people who need services most.

b) Poor ICT infrastructure: Unreliable electricity (load-shedding in the past, still frequent in rural areas), weak broadband backbones, low bandwidth, and lack of fibre connectivity to many local levels. Many wards lack even basic computers and internet.

c) Lack of digital literacy: A large section of citizens cannot operate computers or smartphones, fill online forms or use digital signatures. Government staff themselves often lack ICT skills and are resistant to change.

d) Financial constraints: High cost of hardware, software, licensing, data centres, cybersecurity and maintenance. Limited capital budget and dependence on donor funding make projects unsustainable after the project period ends.

e) Legal and regulatory gaps: Although the Electronic Transactions Act exists, laws on data protection, privacy, cybercrime, digital signature recognition and e-payment are incomplete or weakly enforced. Bureaucratic procedures are still paper-based and legally mandated in many offices.

f) Organisational and attitudinal barriers: Deep-rooted paper-based culture, resistance to change, fear of losing discretionary power (rent-seeking), lack of coordination and duplication among ministries and agencies. Turf wars and absence of a single authoritative coordinating body weaken implementation.

g) Interoperability and data-sharing problems: Different agencies run incompatible systems and databases; there is no unified citizen database. Duplication of data collection wastes resources and creates inconsistency.

h) Cybersecurity and privacy risks: Increasing cyberattacks, data breaches, identity theft and online fraud. Weak cybersecurity infrastructure and shortage of trained cybersecurity professionals erode public trust.

i) Political instability and weak continuity: Frequent changes in government and leadership mean projects are abandoned or redesigned with each change. Lack of long-term vision and accountability for failed projects.

j) Infrastructure and geographic constraints: Difficult terrain, scattered settlements and lack of roads make it costly to extend networks and maintain equipment in hill and mountain districts.

k) Language and accessibility: Most government portals are English-dominated; content in Nepali and local languages, and accessibility features for persons with disabilities, are inadequate.

l) Corruption and procurement issues: Non-transparent tendering, inflated costs and low-quality equipment undermine e-governance projects.

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Conclusion

e-Governance is essential for good governance, transparency and efficient service delivery in Nepal. However, its success depends on simultaneously addressing the digital divide, infrastructure deficits, digital literacy, legal frameworks, cybersecurity and institutional resistance. A phased, citizen-centric approach — with strong political commitment, adequate funding, capacity building and a unified national data policy — is necessary to make e-governance inclusive and effective.

The Nepal Rastra Bank Act, 2058 makes NRB an autonomous corporate body but sets out a close working relationship with the Government of Nepal. The main provisions are as follows.

1. Banker, advisor and agent: NRB acts as banker, financial advisor and fiscal agent of the Government. It keeps government accounts, receives revenue and makes payments, and advises on monetary, foreign-exchange and financial matters.
2. Debt manager: NRB issues and manages government securities (treasury bills, development bonds) on behalf of the Government.
3. Ways and means advance: NRB may give the Government a temporary advance to cover revenue shortfalls, limited to a prescribed share of estimated revenue and repayable within the fiscal year. Other direct lending to the Government is restricted.
4. Representation on the Board: The Secretary of the Ministry of Finance is a member of the NRB Board, which supports coordination of fiscal and monetary policy.
5. Appointment of top officials: The Government appoints the Governor and Deputy Governors for fixed terms (five years). They can be removed only on grounds stated in the Act.
6. Autonomy: NRB formulates and implements monetary policy independently. Government control over day-to-day operations is limited.
7. Foreign exchange: NRB manages foreign-exchange reserves and exchange-rate policy in consultation with the Government.
8. Accountability and reporting: NRB submits annual and periodic reports and audited accounts to the Government, which presents them to the Federal Parliament.
9. Profit: After provisions and reserves, the surplus is paid to the Government.

Thus the Act aims at coordination with autonomy and accountability.

The Financial Information Unit (FIU) is established within Nepal Rastra Bank under the Asset (Money) Laundering Prevention Act, 2064 as the national agency for financial intelligence. Its functions, duties and powers are:

1. Receive information: collect threshold transaction reports (TTRs), suspicious transaction reports (STRs) and other information from reporting institutions (banks, insurers, securities and cooperative bodies, casinos, etc.) and from government agencies.
2. Analyse: study and analyse the information received to detect money laundering and terrorist financing.
3. Disseminate: send the results to the Department of Money Laundering Investigation and other investigating bodies; exchange information with foreign FIUs under reciprocity.
4. Demand information: require reporting institutions to supply details, records and documents.
5. Supervise and inspect: inspect and monitor reporting institutions for compliance (customer identification, record keeping, reporting).
6. Directives and guidelines: issue directives on reporting formats, customer due diligence and internal controls.
7. Records and confidentiality: maintain a database and keep the information confidential.
8. Coordination and reporting: coordinate with regulators and agencies, and carry out other functions prescribed by law.

Under the Payment and Settlement Act, 2075 (with the NRB's payment-system regulations and directives), NRB examines an application for permission to operate a payment system or provide payment services, and may refuse the permission letter in the following situations.

1. Incomplete or false application: the application does not follow the prescribed format or documents, or contains false or misleading information.
2. Capital: the company does not meet the minimum paid-up capital or financial strength prescribed by NRB.
3. Unsuitable promoters, directors or management: they are disqualified, have a bad record, or lack the required character and experience (for example blacklisted, convicted of financial crime or bankrupt).
4. Inadequate technology and infrastructure: the company lacks the technical systems, security, risk-management and operational capacity.
5. Unsound business plan: the business plan or operating model is not viable or does not protect users' funds and data.
6. Public and financial-system interest: granting permission would harm the public interest, the stability of the financial system or the orderly development of payment systems.
7. Past violations: the applicant or its promoters have violated the law or NRB directives.
8. Other reasons: any other condition prescribed by NRB.

NRB must give reasons when it refuses.

Procedure to be followed by Nepal Rastra Bank while taking action against Banks and Financial Institutions under BAFIA, 2073:

BAFIA, 2073 has made a provision of a gradual and progressive procedure to be followed by Nepal Rastra Bank (NRB) while taking action against banks and financial institutions (BFIs). The procedure is as follows:

1. Order to rectify (Section 96):

• If NRB finds that a BFI is carrying out transactions contrary to law, its memorandum of association or articles of association, or the directives issued by NRB, or is involved in financial irregularities, NRB may issue a written order to rectify such act within a specified period.
• The BFI must submit its clarification within the period specified in the order.

2. Warning (Section 97):

• If the BFI fails to submit satisfactory clarification or does not rectify the act within the specified period, NRB may issue a warning to the BFI, its board of directors, or its chief executive officer, ordering rectification within a stipulated period.
• NRB may also order the BFI to submit and implement a reform/recovery plan.

3. Restriction on transactions (Section 98):

• If the BFI does not rectify even after the warning, NRB may impose restrictions on its transactions, such as:
  • Prohibiting or restricting the collection of deposits, granting of loans, or making of investments;
  • Prohibiting the opening of new branches or offices;
  • Restricting the declaration or distribution of dividends or bonuses;
  • Requiring prior approval of NRB for specified transactions.

4. Suspension of board and appointment of administrator (Section 99):

• If the BFI's financial condition becomes further deteriorated, or its liabilities exceed its assets, or it is unable to fulfill its liabilities, NRB may suspend the board of directors and appoint an administrator (Sankalan Pramukh) for a period not exceeding one year, which may be extended as prescribed.
• The administrator manages the BFI, recovers loans and advances, and prepares a plan for merger, acquisition, or liquidation.

5. Liquidation (Sections 100–101):

• If the BFI cannot be revived even after the appointment of the administrator, NRB may recommend liquidation to the Government of Nepal. Upon approval by the Government, the BFI is wound up and its assets are used to pay depositors and creditors in the prescribed priority order.

6. Other actions:

• NRB may also impose fines on the BFI or its officials, remove directors or the chief executive officer, cancel the licence, or order merger or acquisition with another BFI, depending on the gravity of the act.

Key features of the procedure:

• It is gradual and progressive — order to rectify → warning → restriction on transactions → appointment of administrator → liquidation.
• Natural justice is observed — the BFI is given a reasonable opportunity to explain before each step.
• NRB acts as the regulator, supervisor, and enforcement authority, while liquidation requires approval of the Government of Nepal.

In short, NRB follows a step-wise, proportionate, and law-based procedure — rectification order → warning → restriction on transactions → appointment of administrator → liquidation — before taking final action against a BFI under BAFIA, 2073.