Nepal Rastra Bank Tightens Rules on CSR Fund Spending

Nepal Rastra Bank (NRB) has introduced stricter regulations on how banks and financial institutions can utilize their Corporate Social Responsibility (CSR) funds. In a directive issued on Friday, the central bank instructed that CSR allocations must be spent exclusively on priority sectors, with poverty alleviation at the forefront.

The move follows a recent Supreme Court directive ordering accountability in CSR expenditure. The court ruled that CSR funds should not be diverted to unrelated areas and must directly support poverty reduction initiatives. In line with this, NRB amended the Corporate Social Responsibility Guidelines 2024, explicitly requiring that CSR funds contribute to the welfare and upliftment of the poor, disadvantaged, and targeted groups.

The revised guidelines also mandate that, within the population living below the poverty line, those in extreme poverty must be given first priority. Targeted spending areas include housing, education, healthcare, child and women’s welfare, infrastructure development, and the provision of basic needs such as private toilets and bathing facilities in communities where poor and marginalized populations are concentrated. Use of CSR funds for branding or employee benefits has been strictly prohibited.

Furthermore, banks and financial institutions are required to prepare annual CSR plans and implement them on a semi-annual basis. They must also submit the list of proposed activities to NRB at least 15 days before the start of each six-month period.

Although the Supreme Court ruling was made on December 2, 2024, the full text of the verdict was only published recently. The case was filed by advocate Shashi Basnet and eight others, after which the court ordered NRB to amend existing provisions in line with the law. Current regulations already require banks and financial institutions to allocate at least 1 percent of their net profit to CSR funds.

The full judgment, delivered by Justices Hari Prasad Phuyal and Nripa Dhwoj Niroula, cites the Fourth Nepal Living Standards Survey (2022/23), which reports that 20.27 percent of the population lives below the poverty line. The court stressed that CSR resources must be directed to communities facing extreme poverty.

According to the order, CSR funds should immediately be mobilized for essential needs, including housing, education, healthcare, and the upliftment of women and children in impoverished communities. In cases where such communities have defined settlements, the funds should also be used for infrastructure development and basic facilities like sanitation and bathing spaces.