Kathmandu, Dec 8: In a move aimed at shaping the future of technology-driven finance, Nepal Rastra Bank (NRB) has prepared a draft Artificial Intelligence Guidelines, setting comprehensive standards for the responsible use of AI across banks, financial institutions, and payment service providers.
The guidelines, published by NRB’s Banks and Financial Institutions Regulation Department, come as AI adoption accelerates globally, bringing opportunities for innovation but also raising concerns over ethical risks, data misuse, and systemic vulnerabilities. The Department has requested to submit feedbacks by Poush 15 or December 20, 2025 via written or email [email protected]. The Department has said that it has published the draft guidelines in it’s website.
According to NRB, the new framework seeks to ensure that AI strengthens—not threatens—financial stability, customer protection and institutional accountability. The document outlines regulatory expectations across 13 areas, ranging from governance and risk management to fairness, customer communication and cybersecurity.
The aim of the guideline is to:
- Promote the adoption of AI technologies in a manner that enhances efficiency, innovation and customer experience while ensuring financial stability, integrity and operational resilience.
- Ensure that AI applications in LIs are transparent, explainable, fair, and accountable, and that they uphold customer rights, protect data privacy, and do not result in discriminatory or unethical outcomes.
- Mitigate risks associated with AI, including operational, ethical, systemic, model and cyber risks and ensure that LIs have adequate governance structures in place to manage these risks.
- Foster a competitive and inclusive financial sector that leverages AI to provide accessible and affordable financial services to all segments of the population.
Mandatory governance structure
The guidelines require all NRB-licensed institutions, including commercial banks, development banks, finance companies, microfinance institutions, PSPs and PSOs—to set up an AI governance framework. Boards of directors must determine the institution’s AI risk tolerance, while senior management is tasked with ensuring AI applications align with strategic goals and regulatory standards.
Institutions must also form an AI steering committee with representatives from business, risk, IT, legal, audit and HR to oversee AI development, deployment and compliance.
Strict rules for high-risk AI systems
Financial institutions are required to classify their AI systems as either high-risk or non-high-risk before deployment. High-risk systems include those that could cause significant financial loss, operate with minimal human oversight, or affect customer rights and access to essential services.
Such systems must undergo rigorous testing, validation, continuous monitoring and independent checks for bias and fairness. Institutions must also maintain detailed audit trails aligned with international standards such as ISO/IEC 42001.
Customer rights and transparency
NRB has made transparency a central pillar of the guidelines. Banks must inform customers whenever AI influences decisions affecting them—such as credit scoring, fraud detection or service approvals. Customers must also be given clear, understandable explanations of AI-driven outcomes and an option to opt out without losing essential services.
Stronger cybersecurity and data privacy
AI systems must comply with Nepal’s Privacy Act, 2018, and adhere to NRB’s Cyber Resilience Guidelines. Institutions must adopt data minimization practices and protect sensitive information used in model training.
Annual reporting made mandatory
Licensed institutions must submit annual AI activity reports to NRB using a standardized template. Critical AI-related incidents, including data breaches or algorithmic failures, must be reported immediately, while minor incidents should be documented and submitted quarterly.
NRB believes the guidelines will promote innovation while ensuring ethical, fair and secure AI adoption across Nepal’s rapidly evolving financial landscape. #nepal #NRB #AI
