Financial inclusiveness is understood as providing and ensuring reliable and affordable financial services to all segments of society. Although access to finance is necessary for all members of society, it is particularly more important for disadvantaged and low income groups, as it provides opportunities for them to save and invest, and protect themselves from various risks such as natural disasters, illness, and loss of livelihoods.
Nepal Rastra Bank (NRB) understands that a literate economically active population would contribute to ensuring financial stability and economic development of the country. The access and use of appropriate financial services, such as credit, savings, insurance and payment, offers poor people an opportunity to undertake income generating activities. Opening of new bank branch in the unbanked areas allows people to use banking facilities and this could generate positive impacts on local households. As financial intermediation deepens, it helps in better distribution of capital and risks and decreases inequality levels.
Therefore, financial inclusion is a major policy priority for NRB which is also included in its Strategic Plan. It has been identified as an important pillar in the National Five-year Financial Sector Development Strategy, which is in the process of approval. NRB has continued deprived sector lending program with a view to expand financial services to rural poor. Banks and Financial Institutions (BFIs) are required to open branches in rural areas first in order to establish branches in urban centers. Interest free loans are provided to BFIs for opening branches in the identified rural districts. Special refinancing policies and interest free loans are other facilities offered to encourage lending in the rural sector. Credit facility on subsidized interest rate is offered to members of cooperatives from Rural Self Reliance Fund. In line with the government’s policies, NRB is introducing “one account in one household” campaign soon and is in the process of preparing regulatory directives to allow non-bank private institutions, such as telecom operators, to take part in delivering financial services. NRB has also developed Financial Sector Development Strategy for the next five years to address the priorities of the financial system in a comprehensive manner and that will be in operation from this fiscal year. Also, social security allowances from the government will be distributed through banking system from this fiscal year.
It is clear from global experience that digital financing services reduces cost of services and helps in enhancing the financial services in remote areas. Therefore, banks and financial institutions and other payment service providers are being encouraged to use digital products and channels, and to this effect NRB has recently released licensing policy applicable for all payment institutions. Unlocking the existing deposits and credit constraints, developing safety nets for rural borrowers, capacity enhancement, strengthening institutional mechanisms and ensuring sound corporate governance are other policy areas of importance, on which NRB will be focusing in the days to come.