Kathmandu. Kathmandu: Nepal Rastra Bank (NRB) is going to implement a framework to identify and regulate systemically important payment systems to maintain the stability of nepal’s financial system. Service providers identified as systemically important payment systems are considered important because any weakness or failure in it can cause irreparable damage to the entire financial sector.
Especially when the volume of transactions or services provided by a particular organization has a major impact on the financial system of a country, it is identified as a systemically important institution. Since it affects the overall economy and financial system of the country concerned, such institutions are provided with special regulation and monitoring by the regulator.
In neighbouring India, state-owned life insurers LIC India and reinsurer GIC Ri are systemic key insurers. Both these entities are being closely monitored and regulated by the Insurance Regulatory and Development Authority of India.
The criteria have been set for the recognition of the payment system of systemic importance proposed by the Rastra Bank through the draft format. A payment service provider that meets one of the proposed five criteria will be identified as a payment service provider of systemic importance.
प्रणालीगत Important Payment System Identification Criteria:
#
– Transactions to be completed within the stipulated time as defined by the Rastra Bank and large amount of payments will be handled
– The only important payment system for the country’s financial market location#
– Largest payment system by value of total payment
– More than one-third of the transaction value of the retail market or more than two-thirds of the transaction volume has a market share
– Having high interrelationships with other payment systems
Nepal Rastra Bank (NRB) may also recognize other systems that are important for the financial system as payment service providers of systemic importance as per the requirement.
Based on the criteria proposed by the Rastra Bank, apart from Nepal Clearing House (Connect IPS), eSewa, post-merger IME Pay and Khalti are also likely to come under special importance payment service providers.
Strict standards will be applied for service providers identified as payment service providers of systemic importance.
भुक्तानी system must abide by:
1. Legal recognition: All operations, including the completion of transactions, netting arrangements, should be legally binding.
2. Clear rules – Participation criteria, risk management policies and default management procedures should be clearly defined.
3. Risk management – Credit, liquidity and operational risks should be controlled by taking measures including real-time transactions, contingency planning.
4. Effective governance – Transparency, accountability and dialogue with relevant stakeholders.
4. Regulatory compliance – Major operational changes should inform the Rastra Bank and conduct regular self-assessment in accordance with international standards such as financial market infrastructure principles.
5. Financial stability – Systemic risk control should be done by collaborating with regulators and other financial institutions.
The Rastra Bank will conduct an annual review of the identified payment systems and may make further assessments in case of major changes in the market or operations. The central bank may modify payment system related standards of systemic importance as needed.
This decision reflects the rastra bank’s commitment to maintain financial stability. By adopting international standards, Nepal seeks to credible its financial position and support long-term economic growth. The move is based on international practice, where central banks attempt systemic risk control by following the framework of regulatory bodies, including the Bank for International Settlements.
