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Nepal: Insurance moves to purview of central & state govts

Source: Asia Insurance Review | Nov 2015

Nepal’s newly-promulgated Constitution has placed insurance under the joint purview of both the central and provincial governments. The central government will devise policies for the sector while provincial governments will focus on operations. 
 
   Though a preliminary draft of the Constitution had put banks and financial institutions (BFIs) under the ambit of provincial governments, the new Constitution which came into effect on 20 September has removed the provision following protests in the financial sector. It creates seven provinces, replacing the former system of five regions. 
 
Nepal Rastra Bank will have authority over BFIs
As per the new Constitution, the central bank, planning authority, financial policy, money and banking, monetary policy and foreign assistance will come under the central government’s purview. This means that the Nepal Rastra Bank (NRB), which is the central bank, will have the authority to license, monitor and regulate BFIs regardless of where they are based. 
 
   NRB Governor Chiranjibi Nepal told Republica: “The new Constitution recognises the central bank as the sole regulator of the BFIs in the new federal set up. Though the province will have the rights to look after the operational aspects, such authority of the province will be as per the central bank’s policy only.” 
 
The Constitution also states that provincial and local governments cannot obstruct free flow of goods and services across the provinces and at the local level. However, some bankers say that the provision to allow provinces the right to oversee the operations of BFIs could increase operational risks for BFIs.
 
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