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The government has started preparation for the budget for the upcoming fiscal year 2026/27 that begins in mid-July.

The Revenue Advisory Committee, formed by the Ministry of Finance to collect recommendations on revenue policy, tax structure, customs rates, revenue administration and broader macroeconomic reforms, on Monday  called on stakeholders to provide comprehensive suggestions on tax rates and revenue policies for the next budget.

According to a finance ministry, the committee will collect suggestions from different stakeholders, compile them, analyze them and submit its recommendation to the ministry by mid-May.

The government is constitutionally bound to present a budget for the next fiscal year on May 28.

The committee, chaired by Revenue Secretary Bhupal Baral, has sought suggestions from government agencies, private-sector umbrella organizations, academia and the general public. Stakeholders can submit their recommendations through the Ministry of Finance, the Ministry of Industry, Commerce and Supplies, the Inland Revenue Department, the Department of Customs, the Revenue Investigation Department, and the Department of Money Laundering Investigation, and their subsidiary offices, among others.

The committee has been mandated to recommend policy and legal reforms related to income tax, value-added tax (VAT), excise duty, the education service fee, digital service tax, taxes on e-commerce, and other internal taxes governed by the Finance Act. It has also been tasked with reviewing tax rates, simplifying procedures, broadening the tax base, improving the overall tax system, and proposing reforms in revenue administration and organizational structure.

Beyond internal taxation, the committee’s scope includes industrial promotion and protection, import and export policy, trade in services, investment promotion, supply management, and tax and non-tax incentives. It will also review customs rates and measures to protect domestic production, improve valuation systems, facilitate trade, strengthen border management, and reform customs administration.

Controlling revenue leakage and curbing smuggling are the other key focus areas of the committee. The committee will study trends in illicit trade, foreign exchange regulation, financial crimes, and asset laundering and recommend legal and institutional reforms where necessary. Revenue and policy reforms in agriculture, energy, tourism, civil aviation, and natural resource management have also been incorporated into its assessment.

The panel will also study issues in banking and financial institutions, insurance, remittance flows, capital markets, cooperatives and real estate transactions, particularly in relation to revenue mobilization and regulatory gaps. It has been authorized to identify new non-tax revenue sources, review and rationalize rates, address tax duplication among federal, provincial and local governments, and suggest improvements in intergovernmental revenue management and revenue sharing.

To make its sectoral analysis more effective, the committee has formed nine thematic subcommittees—Internal Revenue; Revenue Leakage and Investigation; Customs; Industry, Commerce, Investment and Export Promotion; Agriculture, Energy and Tourism; Bank, Financial Institutions, Insurance Cooperative and Capital Market, Non-Tax and Inter-Government Revenue Management; Overall Economic; and Asset Laundering Prevention and Investigation. 

Members of the committee include an Executive Director from Nepal Rastra Bank, a joint secretary from the Ministry of Industry, Commerce and Supplies, and two experts—an economist and a tax specialist—nominated by the Finance Ministry. 

Similarly, academia is represented by the chief or a designated senior professor from the Central Department of Economics at Tribhuvan University, while private-sector participation includes the presidents or designated senior officials of the Federation of Nepalese Chambers of Commerce and Industry, the Nepal Economic Association, the Confederation of Nepalese Industries, the Nepal Chamber of Commerce, the Federation of Nepalese Industries and Commerce, and the Federation of Nepal Cottage and Small Industries. A joint secretary from the ministry’s Revenue Management Division is the member secretary of the committee

Nepal Rastra Bank (NRB) has announced a series of measures aimed at reviving sluggish credit growth and easing pressure on businesses amid excess liquidity in the banking system in the mid-term review of the Monetary Policy for fiscal year 2025/26.

The central bank has relaxed provisions related to working capital loans and expanded the scope of priority sector lending. However, it has kept key monetary instruments unchanged, including the interest rate corridor, the bank rate, the cash reserve ratio (CRR), and the statutory liquidity ratio (SLR).

Banks and financial institutions (BFIs) will now be allowed to determine the tenure and limit of permanent working capital loans based on their own analysis of a borrower’s cash flow and financial statements. Currently, banks can extend permanent working capital loans for 3-10 years. Once the change comes into effect, banks will have greater flexibility to assess borrowers and fix appropriate limits accordingly.

The central bank has also eased a controversial provision requiring borrowers to reduce their working capital loan outstanding by at least 10 percent for at least seven consecutive days each year. This threshold will now be revised to 30 percent.

The private sector had long complained that the 10 percent rule was creating operational difficulties, particularly for businesses with continuous working capital needs. NRB said the provision will be amended to provide relief while maintaining financial discipline.

NRB has also broadened the definition of priority sectors. In addition to agriculture, energy, and micro, cottage, and small enterprises, the revised framework will now include tourism, IT, and export-oriented industries based on domestic raw materials. The central bank said the existing requirement for BFIs to maintain minimum lending ratios in each specified sector will also be revised.

At present, commercial banks must allocate 15 percent each of their total loans to agriculture and micro, cottage, and small enterprises, and 10 percent to energy. Development banks are required to extend at least 20 percent of their loans to agriculture, small enterprises, energy, and tourism, while finance companies must maintain a minimum of 15 percent in these sectors.

To help manage excess liquidity, NRB has increased the limit on non-deliverable forward (NDF) investments in foreign currency. Banks may now invest up to 30 percent of their core capital in NDF instruments, up from the existing 25 percent. The ceiling had previously been lowered to as little as 15 percent during periods of liquidity stress.

The decision to raise the NDF limit would allow banks to deploy surplus funds abroad amid a liquidity surplus situation. Additionally, loans extended to businesses displaced by the expansion of the East-West Highway and the Mid-Hill Highway can be restructured or rescheduled at a minimum interest rate of 10 percent until mid-July 2026.

The central bank has also pledged to facilitate foreign investment in physical infrastructure, such as data centers, cloud computing, robotic labs, and artificial intelligence (AI) facilities. It said banks and financial institutions will be encouraged to participate in co-financing such projects.

NRB has also said it will adopt a strategy of promoting electronic payments by gradually reducing check-based transactions. The review also calls for the effective implementation of provisions that prevent borrowers facing genuine situational difficulties from being blacklisted immediately. Borrowers already on the blacklist may be removed for up to six months if they present valid reasons and begin repaying their dues.

With less than two weeks remaining before the House of Representatives election scheduled for March 5, Election Commission Nepal has unveiled a sweeping 64-point directive aimed at tightening campaign discipline, curbing financial irregularities, and preventing the resurgence of election-related malpractices.

The detailed code comes amid growing concerns over rising campaign expenditures, the expanding influence of social media, and recurring allegations of voter inducement and misuse of state resources in past elections. By introducing stricter enforcement mechanisms and clearer prohibitions, the Commission appears determined to project institutional authority and reinforce electoral credibility.

Nepal’s previous electoral cycles have often been marred by accusations of vote buying, use of public vehicles and state machinery for partisan purposes, and inflammatory rhetoric targeting marginalized communities. While the country has largely avoided large-scale electoral violence in recent years, sporadic incidents of intimidation, financial inducement, and character attacks have persisted.

The new directive signals the Commission’s effort to close regulatory gaps — particularly in campaign financing and digital campaigning — while reinforcing the spirit of the Election Code of Conduct, 2082 and prevailing federal election laws.

Campaign activities—including rallies, assemblies, door-to-door outreach, and media promotions—are permitted only between Falgun 4 and Falgun 18 (February 16-March 2, 2026). A mandatory 48-hour silence period before polling will prohibit all forms of campaign activity, including social media posts and online messaging.

The emphasis on digital silence reflects a recognition of the increasing role of online platforms in shaping voter perceptions. By extending restrictions to social media sharing and reposting, the Commission is attempting to prevent last-minute misinformation or targeted messaging.

A central feature of the directive is its stringent financial oversight. Candidates must route all election-related expenses through banks or financial institutions. Contributions exceeding NPR 25,000 must be deposited into a separate bank account, and detailed expenditure reports must be submitted within 35 days of the election results.

The Commission has also prohibited financial assistance from government bodies, NGOs, educational institutions, and public entities in violation of federal law. These measures are widely interpreted as an effort to curb opaque funding channels and reduce the influence of money in politics.

Election analysts note that effective enforcement will be key. While reporting requirements have existed in previous elections, critics argue that monitoring mechanisms have historically lacked teeth. The Commission’s public warning of strict action suggests a more assertive approach this time.

In a notable shift, the directive severely restricts visual campaign materials. Only a single-color leaflet of limited size is permitted. Posters, banners, digital displays, flex boards, wall paintings, and even digital advertising boards are banned. Sound systems may only be used during approved assemblies between 7:00 am and 7:00 pm.

The prohibition of plastic and non-biodegradable materials marks an environmental dimension to the code, aligning electoral conduct with broader sustainability concerns. Parties are required to collect and manage campaign materials responsibly after events.

Additionally, the use of children in campaign activities has been explicitly barred, reinforcing child protection standards.

The directive introduces strict vehicle regulations. Candidates may use only up to two light vehicles in their constituency, subject to prior approval from the Election Officer. Vehicles cannot be used to transport voters, and motorized rallies are prohibited.

These measures target a common election-time practice of mobilizing voters through organized transport, which critics argue can distort voter autonomy and create unequal advantages for wealthier candidates.

To protect ballot integrity, the Commission has reiterated prohibitions against tampering with ballot papers and boxes, producing fake ballots, unauthorized entry into polling or counting centers, and carrying weapons near polling stations.

Access to polling and counting venues will be strictly limited to authorized personnel, voters, and approved representatives. Disturbances within 300 meters of polling centers are banned.

The directive explicitly bars campaigning that promotes hatred based on religion, caste, ethnicity, language, gender, or region. It also prohibits rhetoric undermining Nepal’s sovereignty, territorial integrity, or federal democratic republican system.

This provision reflects heightened sensitivity to divisive narratives in a politically fragmented landscape. By including protections for senior citizens, women, sexual and gender minorities, and persons with disabilities, the Commission signals an intent to safeguard inclusive democratic participation.

The Commission has encouraged citizens and political actors to report violations to Election Officers, Chief Election Officers, local administration, or directly to the Commission. This participatory monitoring model aims to expand oversight beyond institutional mechanisms. 

The breadth of the 64-point directive underscores the Commission’s attempt to assert regulatory control in a competitive and often polarized political environment. However, the true test will lie in enforcement.

In its concluding appeal, the Commission has urged all parties and candidates to fully comply with the directive and contribute to an election that is free, fair, transparent, credible, and fear-free.

As political parties prepare to intensify their outreach within the limited campaign window, observers say adherence to the code will determine not only the credibility of the March 5 vote but also public trust in Nepal’s evolving democratic institutions. 

Halfway through fiscal year 2025/26, the government has been compelled to confront an uncomfortable reality: ambitious plans announced at the beginning of the year are no longer financially or administratively feasible. 

The mid-term review of the fiscal budget reflects a series of downward revisions on spending, growth projections, and revenue targets. This highlights the persistent structural weaknesses of Nepal’s public finance management.

Budget size trimmed by Rs 275bn

The finance ministry has trimmed the budget for the current fiscal year by 14.04 percent. Then Finance Minister Bishnu Prasad Paudel had brought a budget of Rs 1,964.11bn in mid-May last year. However, with revenue shortfalls and sluggish expenditure performance, the government has now slashed the allocation by Rs 275.78bn, bringing the revised budget size down to Rs 1,688.32bn.

The reduction is a tacit admission that the government overestimated both its ability to mobilize resources and its capacity to spend effectively. Despite the cut, Minister for Finance Rameshore Prasad Khanal insisted that the budget has not technically been reduced. “The budget remains Rs 1,964bn. If any government body can spend that amount, the originally estimated resources will be made available,” he argued. 

He, however, pointed to the Rs 130bn deficit in the government treasury as the reason for tighter controls.

Chronic problem of slow capital spending

One of the most worrying indicators in the mid-term review is the dismal performance of capital expenditure. As of Feb 10, only 14.98 percent of the capital budget had been spent. This is an alarmingly low figure for a country desperate for infrastructure development.

The government had originally allocated Rs 407.88bn for development projects. This allocation has now been reduced by 40.35 percent to Rs 243.30bn by suspending funding for projects deemed unprepared or unproductive.

The mid-term review has identified lack of project preparedness, difficulties in land acquisition, complications related to forest clearance, and damage caused to infrastructure during the GenZ protests of Sept 8 and 9 as the reasons behind slow capital expenditure.

The cabinet had frozen most of the Rs 119.53bn allocated to projects lacking adequate groundwork, the Cabinet has frozen most of the funds. However, Rs 42.28bn has been released following justification from concerned ministries.

Growth target slashed to 3.5 percent

The government had set an ambitious six percent economic growth target for the current fiscal year.. The mid-term review has now revised that estimate sharply downward to 3.5 percent.

The downgrade reflects weak performance in agriculture and construction, sluggish real estate transactions, and disruptions caused by social unrest. According to the review report, a decline in paddy production, reduced cultivated area, and lower productivity have dragged down the agricultural sector, while construction activity has remained subdued.

Even the revised 3.5 percent target remains more optimistic than external projections. The World Bank has forecast Nepal’s growth at just 2.1 percent for this fiscal year, citing political uncertainty and economic disruptions. Economic growth in the previous fiscal year has been estimated at 4.6 percent.

Slow spending by development ministries

The very ministries entrusted with driving development have performed the worst over the first half of the current fiscal year. 

According to the mid-term review report, the Ministry of Urban Development has utilized only 6.31 percent of Rs 91.35bn allocated to it. The Ministry of Physical Infrastructure and Transport fared comparatively better, spending 18.12 percent of the total allocation of Rs 153bn.  The Ministry of Energy, Water Resources and Irrigation also managed to spend only 16.56 percent of the allocated Rs 42.77bn.

In contrast, non-development ministries have fared better. The Ministry of Foreign Affairs has already spent 55.8 percent of its budget, while the Ministry of Finance itself has spent 35.54 percent.

Revenue collection falls short

Revenue mobilization has also been weaker than expected. By mid-January, only 81.75 percent of the targeted revenue had been collected. The government could mobilize only Rs 581.4bn out of the targeted Rs 711.20bn in the six-month period. Although revenue is 2.47 percent higher than last year, it remains far below the required level.

Import growth of 17.36 percent has not translated into proportional customs revenue, which rose by only 8.48 percent. The finance ministry has attributed this to increased imports of low-tax goods, ineffective border control, and weak market monitoring.

Lower interest rates have reduced income tax collections, while sluggish real estate and stock market activity has hit capital gains tax. The tourism sector has also underperformed, partly due to the September unrest. Citing these reasons, the government has revised down revenue target from Rs 1,480bn to Rs 1,298bn.

Over the past five years, the Commission for the Investigation of Abuse of Authority (CIAA), under the leadership of Prem Kumar Rai, has sought to make the commission more proactive in controlling corruption and promoting good governance. Under Rai’s leadership, the CIAA has taken strong action against irregularities and corruption in public land, information technology, healthcare, and aviation sectors. In a special interview with Balkrishna Basnet and Surendra Kafle of Annapurna Post, the sister publication of The Annapurna Express, Rai, who rarely speaks to the media, shared his views.

You have completed five years leading the CIAA. Which areas did you focus on during this period?

There is widespread embezzlement and misuse of government and public land across the country. In many places, such land has been registered in individuals’ names. From the outset, I said my first priority would be to bring such land back under government ownership.

Second, at the policy level, I focused on reforming the Prevention of Corruption Act and the CIAA Act. These laws had become outdated and required amendments. At that time, sting operations had also been halted. From the beginning of my tenure, I made it clear that policy reform would be a key priority.

Third, public perception of the CIAA had become increasingly negative. I committed to restoring the institution’s credibility. These were the three main priorities I pledged to pursue.

When I first studied the condition of the CIAA, I found that digitalization had not been implemented. Immediately after assuming office, I prioritized digitalizing the entire system—from complaint registration to detailed investigation processes. This has made it easier to assess governance status and identify urgent actions.

What kinds of land-related cases emerged? What trends did you observe?

We are extremely weak in maintaining land records. Proper digitization has not been completed. It was found that even responsible agencies, such as District Administration Offices, local governments, and the Ministry of Land, had failed to adequately protect government and public land.

After the Land Act of 1964, a decision was made to bring land exceeding the legal ceiling—held by Rana elites, Shah rulers, and wealthy landlords—under government ownership. The CIAA has repeatedly written to the Ministry of Land Management to implement this decision. However, even after decades, excess land has not been reclaimed. This is a major institutional weakness.

Even after 50 years, such land continues to be misused. This reflects a failure on the part of the Government of Nepal. In Kathmandu Valley alone, one individual still holds more than 4,000 ropanis of land. There are many similar cases.

It is said that the information technology sector is even more chaotic. Is that true?

Yes, the IT sector was deeply problematic. Serious irregularities were found in the purchase, installation, and operation of software and related systems. After we assumed office, the CIAA began investigating this sector in depth for the first time. Previously, there was limited understanding of IT within the institution. Complaints were filed, but even investigators struggled to fully grasp technical aspects.

Because IT is complex and constantly evolving, officials often accepted suppliers’ claims without sufficient scrutiny. Procurement in the IT sector proved highly risky. Determining the actual value of software was difficult. Prices could be arbitrarily inflated, specifications manipulated, and verifying compliance required additional IT expertise.

A small group monopolized the sector. Since only a limited number of experts understood the systems, they exploited this knowledge gap. In projects such as the Teramocs system, Security Press, Government Integrated Data Center (GIDC), and telecom billing systems, prices were massively inflated. For example, equipment worth Rs 10m was sometimes priced at Rs 250m to accommodate commissions.

Besides land and IT, which other sectors showed irregularities?

Healthcare was another major sector. Procurement of medical equipment had long gone unchecked. Investigations revealed monopolies by a few agents. Once we filed some cases, complaints began to increase significantly.

In one instance, we spent three months in Madhesh Province, visiting municipalities and rural municipalities. We discovered collusion in drafting technical specifications tailored to specific companies. In some cases, specifications were written for one product, but cheaper alternatives were supplied instead. This was a common method of corruption. Like IT procurement, medical equipment procurement also involved serious irregularities.

It is also said that excessive equipment is purchased but left unused. What did you find?

Yes, this is another serious distortion. Both IT and medical equipment were often purchased beyond actual needs and left unused. By the time they were utilized, they had already become outdated.

There are many examples of equipment being purchased merely to exhaust budgets. In some cases, staff lacked the skills to operate the machines. In Madhes Province and other areas, equipment supplied by provincial authorities and the Department of Health Services was simply stored without use.

In places lacking manpower and infrastructure, unnecessary equipment was procured, creating opportunities for corruption. For example, while villages required basic blood-testing facilities, equipment capable of conducting 20 different tests was supplied unnecessarily. During the Covid-19 period, large quantities of equipment were purchased and later left unused, turning health facilities into storage warehouses.

How is the CIAA dealing with the alleged irregularities in the aviation sector?

We have only recently begun investigating airport construction. There appears to be misuse of budgets in this sector, with greater emphasis on spending allocated funds than on assessing actual needs.

Airports are being built larger than necessary, with excessive and unjustified expenses. For instance, Nepalgunj Airport, which was constructed at a cost of Rs 4bn, reportedly includes a shopping center, which may not be viable. Similar concerns have been observed at Bharatpur and Biratnagar airports. We are studying these issues and preparing further cases. We have already examined the case pertaining to Pokhara International Airport. The Public Accounts Committee also reviewed it and shared its report with us, which supported our investigation. A case has already been filed.

As for Bhairahawa International Airport, which was built with a loan from the Asian Development Bank, it is struggling even to repay interest. Despite this, additional infrastructure such as taxiways is still being constructed, and there are also discussions about building Terminal-2. Such activities are cause for concern.

Airports should only be constructed after thorough feasibility studies, as well as assessment of flight demand, potential returns, public benefit, and air route agreements. The same principle applies to proposed projects such as Nijgadh International Airport.

What kinds of threats do you face as chief commissioner?

In this position, I have simply fulfilled my constitutional responsibility. The commissioners and I act strictly within the authority granted by the Constitution. We do not act with bias or favoritism. Decisions are based on investigative findings.
Naturally, once cases are filed, not everyone will be pleased. In such roles, there are often more adversaries than allies. While direct threats are rare, indirect pressures do occur. Some individuals distance themselves after cases are filed.

How easy has it been to maintain good governance and control corruption?

Many people speak about corruption, but when asked to submit formal written complaints, they hesitate. Maintaining good governance and controlling corruption is challenging and requires collective effort.

There is a misconception that corruption control is solely the CIAA’s responsibility. Many complaints fall outside our jurisdiction, such as assault, fraud, marital disputes, and inheritance conflicts. Each year, around 37,000 complaints are registered, and most do not concern corruption. The CIAA handles only corruption cases. Recently, we have also been granted authority over money laundering cases, and three such cases have been filed.

The CIAA is not the only body responsible for controlling corruption. It is essentially the final resort and primarily a prosecutorial body. Nepal has federal, provincial, and local governments, and their responsibility is to prevent corruption at their respective levels. If they properly enforce laws and maintain accountability, the CIAA’s role would be minimal. The belief that the CIAA alone can control corruption is misguided.

There are widespread claims of corruption at provincial and local levels, aren’t there?

Yes, approximately 50 percent of corruption occurs at the local level. Development projects are sometimes effectively “sold” at provincial and local levels. There is widespread misuse of consumer committees in local governments. Unnecessary staff recruitment and excessive procurement have increased recurrent expenditure. There is a prevailing mindset that “anything can be done.”

Despite the CIAA’s efforts, this tendency has not fundamentally changed. The core issue is that our society appears to have normalized corruption. Our presence creates some deterrence, but without the CIAA’s interventions, Nepal might already have faced international blacklisting. Unless society becomes more aware and proactive, controlling corruption will remain difficult. No one should assume they can escape accountability.

Why is there dissatisfaction toward the CIAA?

Intermediaries or middlemen often play a role in attacks against the CIAA. When such actors influence state operations, they also attempt to influence the commission. Past controversies have also affected the institution’s image.

The CIAA must continue to demonstrate impartiality and independence. There is a tendency among some individuals to seek protection for themselves while demanding strict action against others. Such attitudes undermine good governance and make corruption control more difficult.

The government last week decided to take ownership of and make public a long-awaited report on the restructuring of the Nepal Stock Exchange (Nepse), about a month after it was submitted.

The study, conducted by a five-member committee led by former Chair of the Nepal Accounting Standards Board Prakash Jung Thapa, outlines reforms aimed at transforming the country’s sole stock exchange into a modern, competitive and professionally run secondary market institution aligned with international standards.

It had representatives from the Nepal Rastra Bank, Securities Board of Nepal and Nepse as members, while finance  ministry under-secretary Sharad Niraula served as the member secretary.

Among  others, the report has recommended increasing Nepse’s paid-up capital, bringing in a global strategic partner, gradually divesting government ownership, overhauling the board structure, expanding investment instruments, and strengthening institutional governance and technology.

The committee has proposed raising Nepse’s paid-up capital to Rs 3bn in line with the Securities Market Operation Regulations. For this, it has suggested issuing bonus shares as the primary option, while keeping open the possibility of rights issues or new share issuance in the future to meet additional investment needs related to technology and infrastructure development.

One of the major recommendations made in the report is the entry of a world-class strategic partner to bridge Nepse’s technological and managerial gaps. The committee has proposed inviting a strategic investor from among the world’s top 20 stock exchanges, with at least 20 years of operational experience and membership of the World Federation of Exchanges. Such a partner would be offered 15-25 percent ownership in Nepse, subject to a minimum lock-in period of 10 years. According to the report, the strategic partner should be capable of introducing advanced trading technology, modern investment tools and international best practices in exchange operations.

The study also strongly advocates reducing government dominance in Nepse’s ownership structure, arguing that institutions with overwhelming government ownership often suffer from structural weaknesses, including excessive political influence and lack of operational flexibility. In line with the government’s broader policy of divesting from public enterprises, the committee has recommended gradually reducing state ownership in the stock exchange. For this, it has proposed two divestment models. Under the first, the government would retain a 25 percent stake, while the remaining shares would be sold to a strategic partner and other investors. The second model envisions complete government exit, with 20 percent of shares allocated to the general public and the rest distributed among banks, financial institutions and the strategic partner. “However, any divestment should be preceded by an international-standard valuation of Nepse’s assets and liabilities to determine a fair per-share price,” it added.

Another major reform outlined in the report is the restructuring of Nepse’s board of directors. At present, most board members represent the government or government-owned institutions. To end this government dominance, the committee has recommended reconstituting the board with a majority of independent expert directors. It has also suggested excluding the CEO from board membership to avoid conflicts of interest and mandating at least one expert director nominated by the strategic partner.

To make board appointments more professional, the committee has proposed forming a nomination and remuneration committee responsible for selecting directors based on defined qualifications and determining their remuneration according to performance.

The report has also placed strong emphasis on diversifying investment instruments and services. Currently, Nepse offers a limited range of products which has limited investors’ ability to diversify risk. The committee has recommended introducing exchange-traded funds, infrastructure funds and derivative instruments linked to equities and indices. It has also called for the launch of platforms for small and medium enterprises and startups, as well as services such as margin trading, securities lending and borrowing, short selling, intraday trading and advanced IT services including API partnerships, data analytics and co-location facilities.

Institutional governance reforms form another key component of the recommendations. Identifying gaps in risk management, internal control systems, human resource policies and incentive structures, the committee has suggested comprehensive reforms covering board oversight, director qualifications, remuneration and incentives, risk management frameworks, internal controls, and transparent recruitment, career development and benefit systems for employees.

Realizing the need to align Nepse with global regulatory and operational standards, the study panel has recommended adhering to principles set by the International Organization of Securities Commissions (IOSCO), establishing critical market infrastructure such as a central counterparty (CCP), and expanding cooperation with international stock exchanges to enhance competitiveness and credibility.

The cabinet formed the study committee on Nov 18 at the initiation of Minister for Finance Rameshore Prasad Khanal. It submitted its report on Jan 12. 

Net profits of commercial banks have rebounded in the second quarter of the current fiscal year 2025/26, supported by improving loan recovery, easing costs of funds, and a gradual pickup in economic activity. 

Financial statements of the 20 commercial banks until mid-January of the current fiscal shows that while banks continue to face challenges such as excess liquidity, weak credit demand, political uncertainty and a sluggish capital market, key financial indicators have begun to improve.

Commercial banks collectively earned a net profit of Rs 30.59bn in the second quarter. This represents an increase of 11.52 percent compared to the same period of the previous fiscal year, when Class ‘A’ banks had posted a combined profit of Rs 27.43bn.

Bankers attribute the overall improvement primarily to better loan recovery and a gradual revival in economic activity. They say repayment behavior has improved after a weak first quarter marked by floods, landslides and social unrest, which has helped banks stabilize earnings.

Nabil Bank emerged as the largest profit earner in the review period as its net profit surged by 46.71 percent to Rs 4.75bn by mid-January. Global IME Bank followed as the second-largest profit maker, with earnings rising 6.5 percent to Rs 3.25bn.

Kumari Bank, however, recorded the most dramatic turnaround, posting a staggering 886 percent jump in profit to Rs 2.72bn. In the same period last fiscal year, the bank had reported net profit of only Rs 275.7m. 

Everest Bank reported a modest 2.04 percent increase in profit to Rs 2.11bn, while Prime Bank saw its earnings rise by 9.27 percent to Rs 2.04bn. State-owned Rastriya Banijya Bank more than doubled its profit, posting a 132 percent increase, to Rs 1.77bn.

In contrast, several banks saw profits decline. NMB Bank’s profit fell 17 percent to Rs 1.64bn, while Nepal Investment Mega Bank recorded a 43 percent drop to Rs 1.61bn. Siddhartha Bank’s operating profit rose significantly, increasing from Rs 755.4m to Rs 1.96bn. Sanima Bank posted a 16.67 percent rise to Rs 1.39bn, while Standard Chartered Bank’s profit jumped 150 percent to Rs 1.32bn. Himalayan Bank’s profit declined by 15 percent to Rs 1.29bn.

Nepal SBI Bank recorded a 14.56 percent increase to Rs 1.03bn, while Machhapuchchhre Bank’s profit grew 25 percent to Rs 1.01bn. Prabhu Bank, however, saw its profit fall by 24 percent to Rs 1.01bn.

Among laggards, the government-owned Agricultural Development Bank reported a 26 percent decline in profit to Rs 707.4m. Citizens Bank’s profit dropped by 45 percent to Rs 358.8m, and NIC Asia Bank’s earnings fell by 13.54 percent to Rs 131.1m. 

Laxmi Sunrise Bank was the only commercial bank to remain in the red in the second quarter. According to the bank, it recorded a net loss of Rs 273.6m during the review period. Overall, 12 commercial banks increased their profits in the second quarter, while seven reported declines and one posted a loss.

Lower cost of funds has also supported bank profitability. With ample liquidity in the banking system, deposit rates have eased which reduced interest expenses of banks. At the same time, regulatory forbearance provided by Nepal Rastra Bank, particularly facilities for loan restructuring and rescheduling, has helped banks manage non-performing loans more effectively.

Rising profits have begun to restore confidence in the banking sector. Customers are finding it easier to repay loans, while banks are gradually becoming more comfortable extending fresh credit, particularly to sectors such as hotels, transport and small businesses, where demand is showing early signs of recovery.

In the first Constituent Assembly election held in 2008, Madhes-based parties emerged as a dominant political force in Nepal’s political landscape. In the years that followed, however, they gradually weakened due to repeated internal splits and leadership disputes. As a result, Madhes-based parties performed poorly in the 2013, 2017, and 2022 elections.

In the current electoral cycle, these parties are once again pursuing unification in an attempt to revive their declining political influence. This time, however, they face a serious challenge from the Rastriya Swatantra Party (RSP). At the same time, major national parties, namely the Nepali Congress, CPN-UML, and Nepali Communist Party, are devoting significant time and resources to Madhes to strengthen their national political standing. Against this backdrop, there is growing concern about the electoral prospects of Madhes-based parties in the March 5 parliamentary elections.

Madhes-centric political parties, which have long prioritized identity and inclusiveness in their agendas, are making renewed efforts to reclaim lost strength and credibility. Yet, more than a decade after the implementation of federalism, they have failed to articulate fresh and concrete political agendas. They have also been unable to institutionalize proportional representation and inclusiveness within their own party structures. Long accused of ethnic politics and dynastic leadership, these parties have repeatedly aligned with major national parties—many of which they once labeled anti-federalist—largely for power-sharing arrangements. Such alliances have been poorly received in the Madhes, contributing to a steady erosion of public trust and support.

Meanwhile, Nepal’s major parties have increasingly adopted the language of identity and inclusiveness, further blurring the ideological distinctiveness of Madhes-based parties. As a result, these parties now face both political marginalization and the erosion of their core support base.

Unity bids amid declining trust

In an effort to remain relevant in national politics and ensure representation, Madhes-centric parties have once again moved toward unity. The Janata Samajbadi Party (JSP), led by Upendra Yadav, and the Loktantrik Samajbadi Party (LSP), led by Mahanta Thakur, have agreed to cooperate and jointly contest the elections. With Thakur serving as party patron and LSP chair, the JSP has fielded candidates in all 32 constituencies across the Madhes.

According to JSP General Secretary Ramkumar Sharma, unity was unavoidable. “Federalism is in crisis, and the issue of identity is on the verge of disappearing. We must protect the achievements of the Madhes movement,” he said. Sharma added that the alliance aims to counter threats to democracy, federalism, and political transformation, ensure the formation of a democratic and reform-oriented government, and prevent the misuse of voters’ mandates.

Despite these claims, internal dissent has intensified. Mahanta Thakur, who won the House of Representatives elections in 2017 and 2022 from Mahottari Constituency No. 3 with the support of the Nepali Congress and other parties, announced that he would not contest the March 5 election. Instead, he opted to become a member of the National Assembly.

Initially, this decision generated optimism within the party. However, controversy erupted when Thakur nominated his daughter, Dr Minakshi Thakur, as his replacement. Party leader and former minister Harinarayan Yadav rebelled, filing his own candidacy against her.

This decision split the JSP into two factions. Leaders Krishna Yadav and Shyam Yadav actively campaigned for Harinarayan Yadav, while Ramkumar Sharma and several others backed Minakshi Thakur. Critics within the party argue that Thakur secured a “safe seat” for his daughter while preparing to move to the National Assembly. Defending his decision, Thakur said, “I devoted my life to politics and public service. Why is it wrong to make my daughter my political successor in old age? Why should she be barred from contesting simply because she is my daughter?”

Before party unification, Thakur had been the sole LSP nominee from Mahottari–3, while the JSP had recommended Ramkumar Sharma and Harinarayan Yadav. After unification, control over ticket distribution shifted to Thakur. A senior party leader alleged that experienced grassroots leaders were sidelined in favor of dynastic considerations.

Defections and vote fragmentation

Further weakening the party, former minister Pradeep Yadav—who had led Madhesi politics in Parsa since the Madhes Movement—left the JSP just one day before nominations. He contested from Parsa–1 as a CPN-UML candidate after being denied a ticket by Upendra Yadav. UML chair KP Sharma Oli promptly granted him the nomination. Along with Pradeep Yadav, seven ward chairs, including Birgunj Metropolitan City Mayor Rajeshman Singh, also joined the UML.

Pradeep Yadav said he left the JSP to safeguard his political future after sensing betrayal and marginalization. He claimed the UML was the only party capable of protecting the constitution and democracy, citing KP Sharma Oli’s nationalist stance as a motivating factor.

The JSP has fielded Ramnaresh Prasad Yadav in Parsa–1 and nominated industrialist Ashok Temani in Parsa–2. Meanwhile, Sushil Kumar Kanu—a former ward chair and close ally of Pradeep Yadav—left the JSP to contest as a Rastriya Swatantra Party candidate, further increasing the likelihood of vote splitting. Similar concerns persist in Parsa–3 and Parsa–4, where JSP candidates lack strong grassroots support and senior leaders have been replaced by new entrants.

Broader fragmentation of Madhes politics

Veteran Madhes leader Anil Jha, once closely associated with Madhes-based politics, is now a Nepali Congress candidate from Rautahat–1. He argues that strengthening the federal democratic republic should take precedence over party affiliation. “Even leaders elected from Madhes-based parties fail to secure opportunities for Madhesis,” he said, advocating issue-based politics over power-driven alliances.

The Federal Democratic Front, formed to coordinate Madhes-centric parties, has also failed to maintain unity. Despite early agreements, member parties are contesting against one another in multiple constituencies. The JSP, Janamat Party, Rastriya Mukti Party, and Nagarik Unmukti Party are directly competing in Saptari and Sarlahi, underscoring the collapse of coordinated electoral strategy.

Historical context: Rise and repeated splits

Madhes gained strong political visibility after the 2006 People’s Movement, although organized Madhesi politics dates back to the 1950s BS with Vedananda Jha’s Nepal Tarai Congress. The Madhes Movement of 2007, which was triggered by the exclusion of Madhes issues from the Interim Constitution, forced the state to address demands such as federalism and inclusion. The Madhesi Janaadhikar Forum (MJF), led by Upendra Yadav, emerged from this movement as a major political force.

In the 2008 Constituent Assembly election, Madhes-based parties secured significant representation, with the MJF winning 54 seats. Internal divisions soon followed. The party split in 2010, and the years that followed were marked by repeated fragmentation, mergers, and realignments. Although the parties briefly reunited ahead of the 2017 election—securing 19 seats in Madhes Province—the unity proved short-lived.

In the 2022 election, Madhes-based parties collectively won only 10 seats. Although the JSP and LSP reunited in late 2025, the historical pattern of fragmentation continues to cast doubt on the durability of this alliance.

Once a powerful political force, Madhes-based parties have been weakened by internal divisions, opportunistic alliances, and dynastic practices. While renewed unity offers an opportunity for revival, persistent mistrust, leadership disputes, and ideological dilution continue to undermine their credibility. Whether this latest attempt at consolidation can reverse their decline remains an open question.

Additional reporting by  Manika Jha, Raj Karan Mahato and Kranti Sah