Nepal Rastra Bank has been urged to take a more active, effective, and leading role in Nepal’s efforts to exit the international anti–money laundering grey list. A report published by the Banking Sector Reform Recommendation Task Force, 2082 states that the process of delisting Nepal will require extraordinary institutional commitment, with the central bank’s role being decisive.

According to the report, in line with the fifth amendment to the Anti–Money Laundering Act, the Financial Intelligence Unit under the central bank should be developed as an independent and empowered body. Given the sensitive nature of currency laundering and its direct linkage with the payment system, the task force has identified the central bank’s involvement as central and unavoidable, calling for swift and effective implementation of corrective measures.

The report emphasizes that Nepal should set a clear timeline and pursue policy, institutional, and implementation-level reforms with the goal of exiting the grey list within the next two years. To revive slowing economic activity, the banking sector is advised to adopt greater policy flexibility, expand targeted lending, and address structural weaknesses. The task force notes that despite ample liquidity and declining interest rates, economic momentum has remained weak due to structural problems within the banking system itself.

Excessive regulatory rigidity, heightened risk aversion, and imbalanced merger policies have, according to the report, distanced the banking sector from the real economy. While safeguarding depositors’ interests, the task force has recommended providing necessary policy flexibility. It has also cautioned against rushing merger and acquisition processes, stressing the need for adequate study, preparation, and time-bound implementation. Failure to sufficiently address operating systems, software integration, product structures, and human resource management has limited the expected benefits of mergers, the report states.

The task force observes that several banks and financial institutions that have not undergone mergers are performing comparatively better. It also highlights that appointing new leadership after mergers could help enhance institutional efficiency. The report further recommends harmonizing remuneration among employees at similar levels within a defined timeframe.

In addition, the report suggests granting merging institutions the authority to determine the entire process—including swap ratios—within the legal framework, with the central bank playing a facilitative role. It also calls for encouraging institutions with cross-holdings to move toward mergers.

Regarding concessional loan programs, the task force recommends that the central bank assume responsibility for outstanding government subsidies and reimburse them through dividends payable to the government, enabling the immediate resumption of such programs. It further proposes extending additional credit—based on business viability and collateral—to enterprises that have closed or are operating at a limited scale since the Covid-19 pandemic. The report concludes by advising that restructuring and rescheduling of collateral-backed loans should prioritize the protection of depositors’ interests.