Nepal Rastra Bank (NRB) has increased the paid-up capital of entities involved in the digital payment business. Issuing a new licensing policy on Thursday, the central bank has increased the paid-up capital for payment service providers (PSPs) and payment system operators (PSOs). As per the new arrangement, the paid-up capital of PSPs operating devices other than payment cards has been fixed at Rs 50 million. The paid-up capital of PSPs operating payment cards and other devices has been fixed at Rs 250 million. Similarly, the paid-up capital of PSOs has been fixed at Rs 400 million, while PSOs handling payment transactions outside Nepal through payment instruments issued in the country have to raise their paid-up capital to Rs 800 million.

NRB has set a deadline of 2028 for the existing PSPs and PSOs to meet the new paid-up capital requirement. The companies that have already obtained licenses from the central bank, have to maintain the paid-up capital as prescribed by the NRB by mid-July 2028," says the policy.

According to NRB, the provisions regarding minimum paid-up capital will not be applicable to banks and financial institutions that operate payment services, and institutions established abroad and operating payment-related activities in Nepal. Industry insiders said the central bank, by increasing paid-up capital is looking for a commitment from the promoters of PSPs and PSOs as the majority of companies' business has not grown as expected when licenses were issued. "This move by the central bank will consolidate the payment industry. Those who've been struggling in business or will struggle to meet the new paid-up capital requirements, have now the option to go for a merger," said Suman Pokharel, Vice President of IME Group which operates IME Pay, one of Nepal's leading mobile wallets. The central bank has also opened doors for foreign investors to invest in domestic payment service providers and payment system operators. In the new licensing policy, the central bank has provisioned that companies that have submitted applications for a license to operate payment-related services or those who already have a license can bring in investment from foreign firms and companies with the approval of the NRB. "Such foreign investment should not exceed percent of the paid-up capital of the licensed organization," said the NRB. Earlier, there was no arrangement for foreign investment in domestic PSPs. Operators of such companies have been seeking NRB approval to bring foreign investments. NRB has also paved the way for mergers and acquisitions of payment-related entities. Now, entities dealing with payment may merge/merge with each other or acquire one other institution based on the central bank policy. Currently, there are 10 PSOs and 27 PSPs currently operating in Nepal. Of the 10, three are international companies. The central bank has given permission to Visa Worldwide of Singapore, Mastercard of Singapore, and Union Pay International of China to operate as PSOs. Digital payment in Nepal has grown multifold, particularly after the start of the Covid-19 pandemic in early 2020. According to NRB statistics, Nepal has now more than 20 million mobile wallet users, of which 10.6 million are e-wallet users. Similarly, there are 1.9 million internet banking users in the country.