Nepal Rastra Bank (NRB) has introduced a stricter legal framework requiring banks and financial institutions (BFIs) to channel their corporate social responsibility (CSR) funds only into poverty alleviation and other priority sectors. Issuing a circular to licensed banks and financial institutions last week, the central bank said it has amended the Guidelines on Corporate Social Responsibility, 2024, to prevent arbitrary spending by banks and financial institutions.
The move follows a directive order from the Supreme Court. The apex court had issued a directive order on 2 Dec 2024, hearing a writ petition filed by Advocate Shashi Basnet and eight others. The full text of the verdict released in the second week of July directed the government to register an umbrella bill in parliament within two years to regulate CSR activities more effectively.
Stating that many institutions were spending CSR money contrary to its intended purpose, including for branding exercises or private projects, the top court had ordered the government to ensure that CSR funds are used primarily for poverty alleviation and to hold institutions accountable if funds are diverted. The Supreme Court has clearly stated that such funds must be spent on housing, education, health, children and women's empowerment, specifically targeting communities living in extreme poverty.
Banks and financial institutions are required to set aside at least one percent of their annual profit for CSR initiatives. Given that class ‘A’ banks alone posted a combined net profit of Rs 71.51bn in fiscal year 2024/25, a substantial fund is collected in their CSR funds. However, spending from such funds had remained arbitrary so far. As per the new guidelines, these funds must now directly benefit the poor, marginalized and targeted communities rather than be used for institutional promotion and large-scale projects.
The central bank has said that CSR spending must align with national priorities and international principles of social responsibility, with the goal of uplifting disadvantaged groups and creating a more inclusive and sustainable society.
The revised guidelines also make it mandatory for banks and financial institutions to prepare an annual CSR action plan. Likewise, banks and financial institutions are required to submit a list of their bi-annual activities to the central bank at least 15 days before each half-year period begins. For the current fiscal year, banks have been given until mid-October to submit their first semi-annual plan.
The central bank has clearly stated that CSR funds must be used responsibly to enhance social welfare and not as a tool for corporate publicity. In the revised guidelines, the central bank has also upheld the Supreme Court’s call for stronger accountability mechanisms to ensure the funds reach communities in need.
