Following the new government’s first Cabinet meeting held on Friday, which prioritised the mobilisation of idle financial resources through a 100-point agenda, the government’s plan to transfer funds from decade-old dormant bank accounts into the state treasury has hit a significant legal bottleneck.

Under the current legal framework, the government cannot transfer funds from citizens’ private bank accounts into the state treasury. Even for accounts inactive for over 20 years—where funds are moved to the Banking Development Fund at the Nepal Rastra Bank (NRB)—provisions exist to refund the money if a rightful claimant comes forward.

Protocols governing long-term dormant accounts are set out in the Bank and Financial Institutions Act (BAFIA), 2017, which contains explicit provisions protecting depositors’ rights. Any attempt to bypass these safeguards would require amendments to key sections of the law.

Section 111 (Right to Claims over Deposits) of the Act provides broad protection of private property. Sub-section (4) states that no amount deposited with a bank or financial institution shall be handed over to anyone without the approval of the rightful owner, notwithstanding prevailing laws. Sub-section (1) further clarifies that claims by anyone other than the actual depositor shall not be entertained.

Section 112 (Statement of Unclaimed Deposits) of the Act outlines procedures for unclaimed funds, directing them to the central bank rather than the government’s general revenue. Sub-section (1) requires banks to submit statements to Nepal Rastra Bank (NRB) of accounts that have remained unclaimed for 10 years. Sub-section (3) states that if such deposits remain uncollected for 20 years, they are transferred to the NRB’s Banking Development Fund for use in banking development.

NRB records show that, as of mid-July 2025, the Banking Development Fund held around Rs 70 million. Central bank spokesperson Guru Prasad Paudel said the NRB continues to facilitate refunds through respective banks when claimants present valid documentation, in line with a directive issued on January 13, 2022.

Legal experts say that as BAFIA explicitly designates these funds for banking development under the NRB’s jurisdiction, the government cannot redirect them to the state treasury through a Cabinet decision alone. Any such move would require the Ministry of Finance to amend Section 112(3) through Parliament, a process involving legislative approval and presidential assent.