CBFIN suggests central bank to tighten the PSPs

Kathmandu, Dec. 31

Confederation of Bank and Financial Institutions Nepal (CBFIN) has recommended more robust regulation and supervision of the payment service providers (PSPs).

In a report submitted to the Governor of the Nepal Rastra Bank (NRB), Maha Prasad Adhikari on Tuesday, it said that the number of PSPs is larger than the size of Nepal’s market. CBFIN organised a programme on Friday to inform about the recommendations included in the report.

“In an economy of US$ 2.9 trillion and country of 1.36 billion people, there are only six PSPs in India. But Nepal has 28 PSPs. Therefore, the central bank should make proactive moves to supervise and regulate them,” CBFIN’s report read.

According to it, financial services provided through internet and telecommunication services must be regulated as per the BFIs,  otherwise a situation would arise to opt for force merger of such companies.

Stating that the BFIs’ earning of per share and return rate was continuously decreasing for the last five years, CBFIN suggested the central bank not to set the limit for spread rate for the banks and financial institutions (BFIs) and let the market decide the interest rate.

“The central bank should punish if any BFI resorted to unfair ways to collect interest and fees, but it should not set the limit of the interest,” read the report.

CBFIN also said that the NRB should allow the banks to open their branch offices in foreign countries. Currently, they can only open contact or representative offices in other countries.

 Likewise, it demanded to lower the income tax imposed on the BFIs to 25 per cent in line with other companies. Currently, they are paying 30 per cent income tax in line with the general insurance and petroleum companies. 

Published in The Rising Nepal daily on 1 January 2022.