Laws · Analysis

Central bank leadership benefits: set by a board on which the beneficiaries sit, with 'other benefits' undefined in the Act

Laws Analysis

Research candidate — not legal advice. This is a starting point for lawmakers and legal reviewers, drawn from official reports. It has not been reviewed by a qualified lawyer and does not establish that any law is invalid or that a loophole exists.

Possible loopholeMedium confidenceEnacted ActReform recommendation

Section 19 of the Nepal Rastra Bank Act 2058 says the remuneration and other benefits of the Governor, Deputy Governors and directors shall be as fixed by the Board, on which the Governor (as chair) and the Deputy Governors sit. Section 32(2) bars a member from taking part in discussion of a proposal in which he or she has a personal interest. The Auditor General found that the Bank approved a procedure letting the Governor and Deputy Governors buy their official vehicles on retirement at a depreciated price, said it was not appropriate for office-holders to approve a procedure that included their own benefits, and called for the limits of in-service and post-retirement benefits to be set by law.

Laws and sections involved

  • नेपाल राष्ट्र बैङ्क ऐन, २०५८ · Nepal Rastra Bank Act, 2058 s.19; s.32(2); s.14
    Our translation: s.19 — the remuneration and other benefits of the Governor, Deputy Governors and directors shall be as fixed by the Board. s.32(2) — if a proposal in which the Governor, a Deputy Governor or a director has a personal interest is to be discussed at the Board, he or she must inform the Board before discussion begins and may not take part in that discussion. s.14 — the Board consists of the Governor (chair), the Finance Secretary, the two Deputy Governors and other directors.
    Law Commission consolidated text; royal seal and publication 2058/10/17 (Act No. 15 of 2058); the title page lists nine amending Acts, the latest the Cooperative-related Some Nepal Acts Amendment Act 2081 (2081/12/18). s.19 has no amendment marker in the text we read. Official text

The apparent issue

The Act leaves the benefits of the Bank's top office-holders, including undefined 'other benefits', to a board on which several of them sit, and relies on recusal under s.32(2) to manage the conflict. When a decision covers benefits for the Governor and both Deputy Governors together, it is unclear how recusal operates and whether the remaining members can validly decide; nor does the Act set any outer limit, including for benefits after retirement.

Evidence

  • The Auditor General notes that s.19 leaves the Governor's, Deputy Governors' and directors' remuneration and other benefits to the Board but the Act does not describe the 'other benefits'; that s.32(2) bars them from deciding on their own benefits because of conflict of interest; and that the arrangement under which the Board sets directors' benefits should be reviewed. Office of the Auditor General Fully government-owned entities chapter, Nepal Rastra Bank, para 9, printed p.656 (PDF p.690)
  • The Auditor General found that the Bank approved a procedure under which the Governor and Deputy Governors may, on retirement, take the vehicle they use into their own name by paying the higher of its book value or 20 per cent of purchase price, with vehicles fully depreciated in four years (electric or hybrid) or five years (diesel or petrol). It said that approving a procedure containing one's own benefits did not appear appropriate and that in-service and post-retirement benefit limits should be made clear by law. Office of the Auditor General Same entry, para 9.1, printed p.656 (PDF p.690)
  • In its general comments on public entities, the Auditor General notes that several Acts (the NRB Act s.19, the Nepal Electricity Authority Act s.14 and the Civil Aviation Authority Act s.15) leave board remuneration and benefits to the boards themselves or to rules, and recommends that the Government of Nepal set the remuneration and benefits of public enterprise boards. Office of the Auditor General Organised institutions chapter, general comments, para 4.2, printed p.622 (PDF p.654)
  • ss.14, 19 and 32 of the NRB Act were read in the Law Commission's consolidated text. Nepal Law Commission s.14, PDF p.12; s.19, PDF p.14; s.32, PDF pp.21–22

Possible readings

  1. Reading 1 (the Auditor General's concern): because the beneficiaries chair or sit on the Board and 'other benefits' is open-ended, s.19 allows office-holders to shape their own benefits; s.32(2) recusal is not enough when the decision benefits several members at once, so limits should be set in law or by an outside body.
  2. Reading 2: letting the Board set its members' pay protects the central bank's autonomy from the government; s.32(2) already requires conflicted members to stay out, and decisions taken by the remaining members (including the Finance Secretary and independent directors) are valid.
  3. Reading 3: s.19 covers benefits while in office; whether it also authorises post-retirement benefits such as vehicle transfers is itself unclear, and such benefits may need a separate legal basis.

Why it matters in practice

If Reading 1 is right, benefits decided this way could be questioned and public confidence in governance of the central bank could be affected; similar provisions in other public-enterprise Acts may raise the same issue. If Reading 2 is right, the arrangement is lawful but its transparency depends on how recusal is recorded.

Hypothetical example

Hypothetical: a public body's board, chaired by its chief executive, approves a new allowance for 'all executive members'. The chief executive and two deputies announce a conflict and leave the room, and the three remaining members approve it. Whether this satisfies the recusal rule, and whether any outer limit applies, depends on how the law is read.

Possible improvements and trade-offs

  • Amend s.19 to set in law (or by reference to a defined benchmark) the limits of in-service and post-retirement benefits for the Governor, Deputy Governors and directors (the Auditor General's recommendation).
    Clear limits and less room for self-interest; less flexibility, and if limits are set by the government it may be seen as reducing central bank independence.
  • Create an independent remuneration committee (for example of non-executive directors, or an external panel) to recommend benefits, with decisions published.
    Preserves autonomy while managing conflicts; adds process, and the committee's independence must be ensured.
  • Keep s.19 but require that recusals under s.32(2) and all benefit decisions be recorded and disclosed in the annual report.
    Low cost and improves transparency; does not set any limit.

Questions for legal review

  1. How does s.32(2) apply when a single Board decision sets benefits for several members at once, and is the Board then quorate under the Act?
  2. Does 'other benefits' in s.19 extend to post-retirement benefits?
  3. Would setting limits by the government be compatible with the autonomy the NRB Act gives the Bank?

Research status

Researched
2026-10-12
Confidence
Medium confidence — The provisions were read and the Auditor General states the concern directly, with a concrete example. Confidence is not high because whether any decision breached s.32(2) depends on Board records not opened, and autonomy arguments support the current design.
Review
Not yet reviewed by a qualified lawyer.

Still unresolved

  • The Board decision and the vehicle procedure were not opened; whether conflicted members recused themselves is not known.
  • The Bank's response to the Auditor General was not found.
  • Comparable provisions in the Nepal Electricity Authority Act and the Civil Aviation Authority Act were not opened.

Sources

  1. महालेखापरीक्षकको बासट्ठीऔँ वार्षिक प्रतिवेदन, २०८२ (62nd Annual Report of the Auditor General, 2082) Checked 2026-10-11
  2. नेपाल राष्ट्र बैङ्क ऐन, २०५८ (Nepal Rastra Bank Act, 2058) — consolidated Nepali text Checked 2026-10-11