Nepal Rastra Bank Introduces New Guidelines on CEO Pay and Benefits in Banks and Financial Institutions

The Nepal Rastra Bank (NRB) has issued new guidelines to make the salaries, allowances, and benefits of chief executive officers (CEOs) of banks and financial institutions more structured, transparent, and performance-based.

According to the guidelines, CEO compensation must be determined based on factors such as the institution’s financial condition, risk management, business size, profitability, corporate governance, and long-term sustainability. Banks and financial institutions are also required to form an independent committee under the board of directors to recommend CEO salaries and benefits.

Under the new provisions, CEO compensation will be divided into three categories: fixed annual salary and allowances, performance-based remuneration, and limited additional benefits. Performance-based payments must be evaluated using indicators such as profitability, capital adequacy, risk management, non-performing loans, liquidity, regulatory compliance, and customer satisfaction.

The guidelines also place limits on the facilities that can be provided to CEOs. Institutions may provide only one mobile phone, one laptop, one vehicle, and other approved benefits within prescribed limits. Any additional benefits not specified in the employment contract will not be permitted.

Furthermore, banks and financial institutions must submit details of the basis for determining CEO compensation, related policies, and the pay gap between CEOs and employees to Nepal Rastra Bank. These details must also be disclosed in annual reports.

NRB expects that the new framework will promote good governance, strengthen risk management practices, and ensure greater consistency in compensation systems across the banking and financial sector.