Central Bank’s Autonomy Mocked as Government Holds Unauthorized Meetings, Former Governors Criticize

Summary of reviewed news content. Prime Minister and Finance Minister have disregarded the autonomy of Nepal Rastra Bank by holding direct meetings with executive directors and bankers during the governor’s absence. Finance Minister Dr. Swarnim Wagle conducted a group interview-like meeting with the bank’s executive directors to recommend the Deputy Governor, contravening the spirit of the Act. Former governors have expressed concerns that recent government actions harm the central bank’s independence and undermine trust in the financial system.
21 Shrawan, Kathmandu. Amid ongoing political discord between Prime Minister Balendra Shah and Finance Minister Dr. Swarnim Wagle, the government has begun to mock the autonomy of the central bank. The Nepal Rastra Bank Act, along with financial laws and Supreme Court rulings, guarantees the central bank’s independence and prohibits government interference. Despite this, Finance Minister Dr. Wagle has held direct meetings and discussions not only with CEOs of regulated banks but also with the third-ranking executive directors of Nepal Rastra Bank, bypassing the Governor and Deputy Governor. Similarly, Industry, Commerce, and Supplies Minister Gaurikumar Yadav was recently revealed to have met directly with the Deputy Governor and bank CEOs. Prime Minister Balendra Shah excluded the Finance Minister while consulting industrialists, and likewise, Dr. Wagle held discussions with commercial bank CEOs without involving the governor or deputy governor, signaling a sidelining of central bank leadership.

Former Governor Bijayanath Bhattarai criticized this deviation from regular procedures, noting an atmosphere of distrust. He stated, “Conclusions should not be drawn before results emerge, but abnormal activities are ongoing.” He suggested the Finance Minister may be trying to avoid sitting down with the central bank leadership, meeting only with executive directors and bankers who may hesitate to speak openly. However, Bhattarai stressed that it is inappropriate to exclude central bank representatives from financial sector discussions. Former Governor and ex-Vice Chairman of the National Planning Commission, Deependra Bahadur Kshetri, added that constitutional boundaries were crossed when, alongside Dr. Wagle’s meetings with executive directors, the Prime Minister’s secretariat pressured officials of the Commission for the Investigation of Abuse of Authority (CIAA) to follow certain directives. “The Prime Minister has stated he could detain heads of constitutional bodies for up to five years if necessary,” Kshetri remarked, questioning who truly holds autonomy under such governance. He accused the government of arbitrary procedures lacking due process.

Former Governor Tilak Rawal highlighted that the Nepal Rastra Bank Act 2058 officially established the bank as an autonomous entity. He stated, “Autonomy is not just about what is written in the Act; it also depends on the leaders in charge.” He expressed surprise over the government’s unusual recent activities. At Wednesday’s meeting with executive directors, Finance Minister Dr. Wagle said the purpose was to recommend the Deputy Governor, but the Act clearly assigns authority for such recommendations to the Governor. According to Section 16, the government appoints the Deputy Governor based on the Governor’s recommendation, with the Ministry of Finance’s role limited to forwarding this recommendation to the Cabinet. Although the Ministry historically participates in this process, Dr. Wagle’s collective interview-style gathering of executive directors at the Ministry represents a new, unprecedented approach.

The law requires the Finance Secretary to be a member of the bank’s board of directors to ensure government representation and communication. Nonetheless, the Finance and Industry Ministers have directly interfered in the bank’s internal staffing and regulatory matters, issuing meetings and directives. Despite this, the International Monetary Fund has advised against appointing the Finance Secretary to the board, to avoid government interference. Members of Parliament from the ruling coalition and opposition have also rejected such arrangements, emphasizing the need to preserve the bank’s autonomy in parliamentary finance committee meetings.

The tenures of the Nepal Rastra Bank Governor and Deputy Governor are fixed at five years by law. The government cannot remove the Governor at whim. Past attempts to remove Governors Tilak Rawal and Mahaprasad Adhikari were overturned by the Supreme Court. Under Section 22 of the Act, a Governor can only be removed for serious incompetence or irregularities, pending the formation and recommendation of an investigative committee led by a retired Supreme Court judge. Section 3 defines the bank as a self-governing, legally distinct entity from any government department, capable of independently fulfilling its mandate. According to Section 7, the bank holds full authority over monetary policy formulation, implementation, and management, and can autonomously decide on interest rates, money supply, and credit control. It also manages foreign exchange rates and currency reserves. While Section 4 mandates support for government economic policy without negative impact, Section 106 allows the government to issue directives on currency, banking, and finance, which the bank must follow. Former Governor Kshetri noted that although some directives have been removed over time, they were reintroduced and continue to hinder central bank autonomy. However, numerous Supreme Court rulings have clearly affirmed the central bank’s independence from government interference.