Bill Finalized to Prohibit Individuals with Over 1% Ownership in Banks from Taking Loans, Set to Be Presented in Parliament

In a move aimed at strengthening financial governance and transparency, the Government of Nepal has finalized a new bill that includes a strict provision prohibiting individuals who own 1% or more of the paid-up capital in any bank or financial institution from obtaining personal loans or financial facilities from any bank or financial institution.

The bill has already been drafted and is now in the pipeline to be presented before the Federal Parliament. Once tabled, it will go through parliamentary deliberation, amendments if necessary, and finally, approval before being enacted into law. The main objective of the bill is to prevent conflict of interest within the banking sector, ensuring that those who hold ownership in financial institutions cannot misuse their position to gain personal financial advantages.

Importantly, the restriction applies only to individuals in their personal capacity. If such individuals have established companies, firms, or institutions, those entities will still be allowed to obtain loans from banks under standard lending procedures. This distinction ensures that entrepreneurial and business activities are not hindered, while personal misuse of influence is kept in check.

The bill is designed to address past incidents where major shareholders or board members of banks used their position to access loans for themselves or related parties, bypassing risk assessment and regulatory procedures. Such practices not only pose a risk to the financial institution but also erode public trust in the banking system.

Financial analysts and sector experts have welcomed the proposed legislation, calling it a significant step toward promoting fairness, accountability, and discipline in Nepal’s financial sector. Once passed by Parliament, the Nepal Rastra Bank will issue directives for the implementation of the law.

In essence, this bill represents a clear intent by the government to bring structural reforms to the financial system. By disconnecting ownership from borrowing rights at the individual level, the law aims to protect depositor funds, reduce systemic risk, and ensure that the banking system remains professional and transparent.