Introduction to PSO/PSP Company Registration in Nepal
Payment Service Operators (PSO) and Payment Service Providers (PSP) companies play a crucial role in Nepal’s digital financial ecosystem. These entities facilitate electronic payment transactions, mobile banking services, and digital wallet operations under the regulatory framework established by Nepal Rastra Bank (NRB). The Payment Systems Act, 2075 (2018) and Payment Systems Regulation, 2076 (2019) govern the establishment and operation of PSO/PSP companies in Nepal.
Nepal’s financial sector has witnessed significant growth in digital payment solutions, making PSO/PSP registration increasingly important for businesses seeking to enter the fintech market. The regulatory framework ensures consumer protection while promoting innovation in payment technologies. Foreign investors can also establish PSO/PSP companies through Foreign Direct Investment (FDI) in Nepal, subject to specific compliance requirements.
The Nepal Rastra Bank serves as the primary regulatory authority for payment systems, ensuring that all PSO/PSP companies maintain adequate capital requirements, technical infrastructure, and operational standards. Understanding the registration process is essential for entrepreneurs and investors looking to capitalize on Nepal’s growing digital payment market.
Legal Framework and Requirements for PSO/PSP Registration
Regulatory Authority and Governing Laws
Nepal Rastra Bank (NRB) acts as the sole licensing authority for PSO/PSP companies under the Payment Systems Act, 2075. The Act defines payment service operators as entities that provide payment services to the public, while payment service providers offer technical infrastructure and support services to PSOs. The regulatory framework ensures compliance with international standards while addressing Nepal’s specific financial sector needs.
The Payment Systems Regulation, 2076 provides detailed guidelines for licensing procedures, capital requirements, and operational standards. Companies must demonstrate technical capability, financial stability, and adherence to anti-money laundering (AML) and combating financing of terrorism (CFT) requirements as outlined in the Asset (Money) Laundering Prevention Act, 2064.
Capital Requirements and Financial Standards
PSO companies must maintain a minimum paid-up capital of NPR 500 million for Class ‘A’ licenses and NPR 100 million for Class ‘B’ licenses. PSP companies require a minimum paid-up capital of NPR 50 million. These capital requirements ensure financial stability and consumer protection in the payment ecosystem.
The regulatory framework also mandates maintaining adequate reserves, implementing robust risk management systems, and establishing proper governance structures. Companies must demonstrate sustainable business models and adequate technical infrastructure to support payment operations.
Eligibility Criteria for Promoters and Directors
Promoters and directors of PSO/PSP companies must meet specific eligibility criteria outlined in the Payment Systems Regulation. Key requirements include:
- Clean criminal record with no financial crimes conviction
- Minimum educational qualifications in relevant fields
- Professional experience in banking, finance, or technology sectors
- Compliance with fit and proper criteria established by NRB
Foreign investors can participate as promoters subject to Foreign Investment and Technology Transfer Act, 2075 provisions. The regulatory framework allows up to 80% foreign ownership in PSO/PSP companies, making Nepal investment laws favorable for international fintech companies.
Detailed Registration Process for PSO/PSP Companies
Step 1: Preliminary Application and Feasibility Assessment
The registration process begins with submitting a preliminary application to Nepal Rastra Bank’s Payment Systems Department. Applicants must provide a comprehensive business plan detailing the proposed payment services, target market analysis, and technical infrastructure requirements. The feasibility study should demonstrate market demand, competitive analysis, and projected financial performance.
The preliminary application includes promoter information, proposed capital structure, and initial service offerings. NRB reviews the application for completeness and alignment with regulatory objectives. This step typically involves preliminary discussions with regulatory officials to clarify requirements and expectations.
Applicants must also conduct due diligence on proposed technology partners, service providers, and key personnel. The preliminary assessment helps identify potential regulatory concerns and allows for early resolution of compliance issues.
Step 2: Company Incorporation and Legal Structure Formation
Following preliminary approval, applicants must incorporate the company under the Companies Act, 2063. The incorporation process involves registering with the Office of Company Registrar (OCR) and obtaining necessary corporate documents. The company’s memorandum and articles of association must align with PSO/PSP operational requirements.
Foreign investors must comply with Foreign Investment and Technology Transfer Act provisions, including obtaining foreign investment approval from the Department of Industry. The legal structure should accommodate regulatory requirements while providing operational flexibility for payment services.
The incorporation process includes obtaining Tax Identification Numbers (TIN), establishing corporate bank accounts, and completing other statutory registrations. Proper legal structure formation ensures compliance with both corporate and payment system regulations.
Step 3: Technical Infrastructure Development and Testing
PSO/PSP companies must establish robust technical infrastructure meeting NRB’s technical standards and security requirements. The infrastructure should support secure payment processing, data protection, and system reliability. Companies must implement appropriate cybersecurity measures, disaster recovery systems, and business continuity plans.
Technical infrastructure development includes establishing data centers, implementing payment processing systems, and integrating with existing financial networks. The systems must comply with international security standards such as ISO 27001 and PCI DSS requirements.
Comprehensive testing procedures ensure system reliability, security, and performance under various operational scenarios. The testing phase includes stress testing, security assessments, and integration testing with partner systems.
Step 4: Formal License Application Submission
The formal license application includes comprehensive documentation demonstrating compliance with all regulatory requirements. The application package contains detailed business plans, technical specifications, financial projections, and governance frameworks. All required documents must be properly authenticated and submitted within specified timeframes.
The application undergoes thorough review by NRB’s technical and regulatory teams. The review process includes on-site inspections, technical assessments, and evaluation of proposed operational procedures. Applicants may need to provide additional information or clarifications during the review process.
NRB may conduct public consultations for significant PSO applications, allowing stakeholder input on proposed services. The regulatory review ensures that proposed operations align with national payment system objectives and consumer protection requirements.
Step 5: Final Approval and License Issuance
Upon satisfactory completion of the review process, NRB issues the PSO/PSP license with specific terms and conditions. The license specifies authorized services, operational limitations, and ongoing compliance requirements. License holders must acknowledge acceptance of all regulatory obligations before commencing operations.
The final approval process includes signing regulatory agreements, posting required guarantees, and completing final compliance verifications. Licensed entities must establish ongoing reporting mechanisms and maintain continuous compliance with regulatory requirements.
Post-license issuance activities include system integration with national payment infrastructure, staff training, and operational readiness assessments. Companies must demonstrate operational capability before launching commercial services.
Essential Documents Required for PSO/PSP Registration
Corporate and Legal Documents
The registration process requires comprehensive corporate documentation establishing the company’s legal status and governance structure. Essential corporate documents include:
- Certificate of Company Incorporation from OCR
- Memorandum and Articles of Association
- Board resolutions authorizing PSO/PSP application
- Shareholder agreements and ownership structure details
- Power of attorney for authorized representatives
Foreign investors must provide additional documentation including foreign investment approval certificates, technology transfer agreements, and compliance certificates from home country regulators. All foreign documents require proper authentication and translation into Nepali language.
Financial and Business Documentation
Financial documentation demonstrates the company’s capital adequacy and business viability. Required financial documents include:
- Audited financial statements and capital verification certificates
- Bank guarantee or deposit certificates for required reserves
- Detailed business plan with financial projections
- Market analysis and competitive assessment reports
- Risk management and internal control frameworks
The business plan must demonstrate sustainable revenue models, customer acquisition strategies, and growth projections. Financial projections should cover at least five years of operations with detailed assumptions and sensitivity analysis.
Technical and Operational Documentation
Technical documentation proves the company’s capability to provide secure and reliable payment services. Key technical documents include:
- System architecture and technical specifications
- Security assessment reports and compliance certificates
- Disaster recovery and business continuity plans
- Data protection and privacy policy frameworks
- Integration plans with existing payment infrastructure
Operational documentation includes staff qualifications, training programs, customer service procedures, and complaint handling mechanisms. The documentation should demonstrate comprehensive operational readiness and regulatory compliance capability.
Time Frame and Cost Analysis for PSO/PSP Registration
Registration Timeline and Processing Stages
The PSO/PSP registration process typically requires 12-18 months from initial application to license issuance. The timeline varies based on application complexity, regulatory review requirements, and applicant responsiveness to regulatory queries. Major timeline components include:
Preliminary Review Phase (2-3 months): Initial application assessment, feasibility evaluation, and preliminary feedback from regulatory authorities.
Documentation and Infrastructure Development (6-9 months): Company incorporation, technical infrastructure development, and comprehensive documentation preparation.
Formal Review and Assessment (3-6 months): Detailed regulatory review, on-site inspections, and final approval processes.
Applicants can expedite the process by ensuring complete documentation, proactive regulatory engagement, and early resolution of compliance issues. Delays often result from incomplete applications, technical deficiencies, or inadequate financial documentation.
Cost Structure and Financial Investment Requirements
PSO/PSP registration involves significant financial investment covering regulatory fees, infrastructure development, and operational setup costs. Major cost components include:
Regulatory and Legal Costs:
- License application fees: NPR 500,000 – NPR 2,000,000
- Legal and professional service fees: NPR 1,000,000 – NPR 3,000,000
- Compliance and audit costs: NPR 500,000 – NPR 1,500,000
Technical Infrastructure Investment:
- System development and integration: NPR 10,000,000 – NPR 50,000,000
- Security infrastructure and compliance: NPR 2,000,000 – NPR 10,000,000
- Testing and certification costs: NPR 1,000,000 – NPR 5,000,000
Total investment requirements typically range from NPR 100 million to NPR 500 million, depending on the scope of services and technical complexity. Foreign investors should also consider currency exchange risks and additional compliance costs for cross-border operations.
Post-Registration Obligations and Ongoing Compliance
Regulatory Reporting and Compliance Requirements
Licensed PSO/PSP companies must maintain ongoing compliance with regulatory requirements through regular reporting and monitoring. Key compliance obligations include:
Monthly and Quarterly Reporting: Transaction volume reports, financial statements, and operational performance metrics must be submitted to NRB within specified timeframes.
Annual Compliance Assessments: Comprehensive annual reports covering business operations, financial performance, and regulatory compliance status.
Ad-hoc Reporting Requirements: Incident reports, system outages, security breaches, and other material events must be reported immediately to regulatory authorities.
Non-compliance with reporting requirements may result in penalties, operational restrictions, or license suspension. Companies must establish robust compliance management systems to ensure timely and accurate regulatory reporting.
Operational Standards and Consumer Protection
PSO/PSP companies must maintain high operational standards ensuring consumer protection and service quality. Ongoing obligations include:
- Maintaining minimum capital requirements and financial ratios
- Implementing robust customer grievance handling mechanisms
- Ensuring data protection and privacy compliance
- Conducting regular security assessments and system updates
Consumer protection measures include transparent pricing, clear terms and conditions, and effective dispute resolution mechanisms. Companies must also maintain adequate insurance coverage and customer compensation funds as required by regulations.
Continuous Monitoring and Regulatory Supervision
Nepal Rastra Bank conducts regular supervision and monitoring of PSO/PSP operations through on-site inspections, off-site surveillance, and performance assessments. Regulatory supervision focuses on:
Risk Management Assessment: Evaluation of operational risks, financial stability, and compliance with risk management frameworks.
Technical Infrastructure Review: Assessment of system security, reliability, and compliance with technical standards.
Consumer Protection Evaluation: Review of customer service quality, complaint handling, and consumer protection measures.
Licensed entities must cooperate fully with regulatory supervision and implement recommended improvements promptly. Failure to maintain regulatory standards may result in enforcement actions, including fines, operational restrictions, or license revocation.
Frequently Asked Questions (FAQs)
What is a PSO/PSP company in Nepal? PSO/PSP companies are licensed entities providing payment services and technical infrastructure for digital transactions under Nepal Rastra Bank regulation and Payment Systems Act, 2075 compliance requirements.
How long does PSO/PSP registration take in Nepal? PSO/PSP registration typically requires 12-18 months, including preliminary review, documentation preparation, technical infrastructure development, regulatory assessment, and final license issuance by Nepal Rastra Bank.
Where do I apply for PSO/PSP license in Nepal? Applications must be submitted to Nepal Rastra Bank’s Payment Systems Department in Kathmandu, following prescribed procedures under Payment Systems Regulation, 2076 and related guidelines.
What are the minimum capital requirements for PSO/PSP companies? PSO Class ‘A’ requires NPR 500 million, Class ‘B’ requires NPR 100 million, and PSP companies need NPR 50 million minimum paid-up capital.
