Payment Systems Department LICENSING POLICY FOR MOBILE FINANCIAL SERVICE PROVIDERS, OPERATORS AND REGULATORY REGIMES Mr. Prakash Rai Deputy Director Policy Planning Unit Payment Systems Department Nepal Rastra Bank

Licensing Policy to Institutions/Mechanism Operating Payment Related Activities-2016 (Approved by meeting of the Board of Directors dated 12 June 2016) Types of Institutions/Mechanism operating payment related activities - Payment Service Provider (PSP) - Payment System Operator (PSO) License for PSP - Transaction through electronic card - Transaction through telecommunication network - PSP performs intermediation between customer and service provider and domestic money transfer service in home country

Licensing Policy to Institutions/Mechanism…….. License for PSO - Performing payment related activities (automated clearing house, network of electronic card and payment switch/gateway) Banks and Financial Institutions (commercial banks, development banks and finance companies) can perform as both PSP and PSO Non-banks can perform as either PSP or PSO only

Licensing Policy to Institutions/Mechanism…….. Provision Relating to Letter of Intent - Institutions/mechanism, to perform payment related activities, should obtain letter of intent (LOI) prior to establishment - Required documents: memorandum of association and articles of association, business and technical feasibility study report, personal details of promoters, copy of citizenship certificate of the promoters and tax clearance certificate of latest fiscal year of promoters

Licensing Policy to Institutions/Mechanism…….. Provision Relating to License - After getting LOI, institutions/mechanism should apply with prescribed documents for license - Nepal Rastra Bank shall carry out inspection of physical and electronic infrastructure of institutions/mechanism prior to granting license

Licensing Policy to Institutions/Mechanism…….. Provision Relating to Paid up Capital - Payment Service Provider Institutions operating business through card : minimum Rs. 50 million Institutions operating business through telecommunication technology and network : minimum Rs. 10 million - Payment System Operator: minimum Rs. 100 million - If domestically issued payment instrument can be used for the payment in abroad, the institution requires to maintain paid up capital minimum Rs. 250 million - Institution established abroad and operating for payment related transaction in Nepal requires to maintain paid up capital minimum Rs. 300 million

Licensing Policy to Institutions/Mechanism…….. Special provision (exemptions) to institutions established in abroad and operating business in 10 or more countries - Provision related to paid-up capital - Provision related to human resource - Provision related to standard of measurement of fit and proper test - Provision related to submit letter of intent and other required documents for approval - Provision related to application fee and deposit

Licensing Policy to Institutions/Mechanism…….. Miscellaneous - Settlement of all payment related transactions in the domestic economy to be done in Nepalese currency since mid-July 2018 - Institutions, licensed for payment service operation by issuing cards, are required to follow Payment Card Industry-Data Security Standard (PCI-DSS) to ensure secrecy of information regarding transaction and customer within three years from the implementation of this licensing provision

Directive 2/073 Banks and Financial Institutions (BFIs): Mobile Financial Service (MFS) - MFS: transferring amount from one interest earning account to another interest earning account and goods/services and utilities’ bills payment Non-bank PSP: mobile payment service (MPS) - MPS: transferring amount from one non-interest earning account or wallet to another non-interest earning account or wallet and goods/services and utilities’ bills payment

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