Nepal’s rapidly expanding digital payment ecosystem has come under increased scrutiny after the Nepal Rastra Bank (NRB) identified serious weaknesses in cybersecurity, governance, and regulatory compliance. At the same time, thousands of cooperative depositors in Kathmandu Metropolitan City are still waiting to recover billions of rupees trapped in financially troubled cooperatives, highlighting broader concerns about financial oversight in the country.
According to the NRB’s inspection report for the fiscal year 2024/25 (FY 2081/82 BS), many payment service providers (PSPs), payment system operators (PSOs), and institutions operating the Real Time Gross Settlement (RTGS) system failed to comply with key regulatory and security requirements. The central bank conducted on-site inspections of 16 licensed institutions, carried out a special inspection of one company, and reviewed RTGS operations at six commercial and development banks.
The inspections found that many institutions had not properly verified customers’ Know Your Customer (KYC) information, increasing the risk of financial fraud, money laundering, and other illegal transactions. Weak internal control systems, inadequate cybersecurity measures, outdated antivirus software, and the absence of regular penetration testing were among the major concerns highlighted in the report.
NRB also noted that several companies had not updated their risk management policies, conducted disaster recovery drills, or completed regular system audits. In some cases, wallet systems lacked automatic session timeouts, exposing users to unauthorized access. The report further revealed that certain operators had issued more e-money than the balance maintained in settlement accounts, raising questions about financial discipline and operational integrity.
The central bank warned that unless these shortcomings are addressed promptly, public confidence in Nepal’s digital payment system could decline, while cyberattacks, service disruptions, and financial crimes could become more frequent. NRB has instructed all licensed institutions to strengthen governance, improve compliance, enhance cybersecurity infrastructure, and ensure strict implementation of KYC procedures.
Meanwhile, Kathmandu Metropolitan City is facing another major financial challenge involving the cooperative sector. As of mid-July, depositors of 187 cooperatives have been unable to recover their savings despite submitting formal claims. According to metropolitan authorities, 10,234 depositors are collectively seeking the return of approximately Rs. 8.19 billion.
Among the largest cases is Abhimat Savings and Credit Cooperative, located in New Road, where depositors alone have demanded the return of more than Rs. 2.18 billion.
Officials say the cooperative crisis has continued to worsen despite recent amendments to Nepal’s Cooperative Act, which granted greater authority to local, provincial, and federal governments to regulate troubled cooperatives and facilitate deposit refunds. Although Kathmandu Metropolitan City has successfully negotiated installment-based repayments in 58 cooperatives through mediation, many institutions remain financially distressed.
Authorities have recommended declaring four cooperatives as “problematic institutions,” but no final decision has yet been made by the municipal executive committee. Under the amended law, regulators can freeze the assets, bank accounts, and shares of cooperative operators and their close relatives once investigations begin. Authorities also have the legal power to suspend passports, restrict foreign travel, and seek police assistance to arrest individuals accused of cooperative fraud.
Financial experts believe both the digital payment sector and the cooperative industry require stronger governance, stricter regulatory enforcement, and greater transparency to restore public trust. They argue that protecting consumers, strengthening cybersecurity, ensuring accountability, and improving institutional oversight will be essential for maintaining financial stability and supporting Nepal’s long-term digital and cooperative economy.