Payment and Settlement Act 2075 – Major Provisions

The Payment and Settlement Act, 2075, is a law enacted by the Government of Nepal to regulate and manage payment systems and settlement systems in the country. It provides the legal framework for the operation, supervision, and regulation of electronic and digital payment services. The act mainly authorises Nepal Rastra Bank to oversee and control payment service providers and payment system operators.

Main Objectives

1. To ensure a safe, efficient, and reliable payment system in Nepal.
2. To promote the development of electronic and digital payment services.
3. To regulate and supervise payment system operators and payment service providers.
4. To reduce risks related to payment and settlement transactions.

Two major provisions of the Payment and Settlement Act 2075, from an exam point of view, are mentioned below. 

Chapter 2

Section 3: National Payment Board (राष्ट्रिय भुक्तानी बोर्डको गठन)

Section 3 of the Payment and Settlement Act 2075 provisioned the formation of the National Payment Board. The board consists of 7 members as follows.

Functions, Duties, and Powers of the Board

The functions, duties, and powers of the National Payment Board are mentioned in Section 4. The board holds the following functions, duties, and powers.

1. Making the payment system secure, orderly, and capable of maintaining financial stability, reducing risk, enhancing the credibility of the payment system, and making policy arrangements regarding the modernisation of the payment system.
2. Coordinating among the payment system-related companies.
3. Regular monitoring of the payment system service provider.
4. Giving the necessary instructions to the company and communication service providers about the safe and secure operation of the payment system.
5. Take necessary action against the organization that acts contrary to this act, or direct the concerned department of the bank to send a written order to the relevant body for such action.
6. Form various technical committees and sub-committees as per the need for monitoring, regulation, and supervision, to ensure that the payment system is running smoothly.

Chapter 3

Chapter 3 provisioned the licensing for the payment system operator and the payment system provider. A person who wants to establish a payment system operator (PSO) or payment system provider (PSP) company must obtain approval from Nepal Rastra Bank.

Section 7: Letter of intent to be obtained

Section 7, mentioned the documents to be submitted for obtaining a letter of intent. A person who wants to work as a payment system operator (PSO) or a payment system provider (PSP) should submit an application to NRB for a letter of intent with the following documents and the prescribed fee.

1. MoA and AoA of the proposed company.
2. Commercial and technical feasibility study report.
3.  Citizenship and personal details of the promoter the prescribed format.
4. Source of investment.
5. Tax clearance of the previous fiscal year.
6. A letter of authorization if another person is submitting the application on behalf of the company.
7. Proof that the applicants and founders are not blacklisted or defaulted.
8. Other documents prescribed by the NRB.

NRB can provide a letter of intent within 90 days if everything looks feasible.

Section 8: Application to be given to NRB

Now, after receiving the letter of intent from the NRB, the company should submit the application within 6 months from the date of receiving the letter of intent from the NRB. The company should submit the following documents.

1. MoA and AoA of the proposed company.
2. Details of the office building with facilities and services required to operate the payment system, to provide payment service, and if the building is leased, a copy of the agreement regarding the restoration of the building.
3. A document certifying that the number of shares agreed to be received by the promoter of the organization has been paid.
4. The address of the head office and the locations of the branches.
5. Nature of transaction of business and business plan.
6. List of directors and officers and declarations of eligibility to be directors and officers.
7. Commitment letter for the internal control system and risk management of the company.
8. Other documents prescribed by NRB.

Section 9: License by NRB

NRB shall inspect the physical and technical infrastructure within 30 days of receiving the application as per section 8. Within 60 days, the license shall be provided.

The license application will be rejected if

1. Insufficient physical and technical infrastructure.
2. Insufficient documents, as mentioned in Section 8
3. Not deposited the prescribed collateral amount on the prescribed date.

NRB should provide written information to the applicant with the appropriate reason for rejection.

Other Act and Summary 

• Banking Offence and Punishment Act 2064
• Payment and Settlement Act 2075 – Major Provisions
• Electronic Transaction Act 2063 – Major Provisions
• BAFIA 2073 Major Provisions