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Bank reforms


The Nepal Rastra Bank has prepared an 18-point strategy which includes prescriptions for the financial sector and relates to its own supervision and monitoring capabilities as well. Top on the list is improving management of the country's two large banks-Rastriya Banijya Bank and Nepal Bank Limited-which an auditor early this year described as "technically insolvent." There had been similar prescriptions for the two banks in the early 1990s, when the government even put in Rs 3 billion to upgrade their capital. It left 'improved management' to the banks, but that never happened and explains why the central bank, this time, wants to hand over the two banks to foreign companies under a two-year management contract.

Other reforms include putting a halt to investment by commercial banks in competing ventures, withdrawing government ownership from the Nepal Bank Limited, and introducing stricter rules to govern investments-especially a ceiling on loans that can be provided to the same borrower. Also on the cards is an investigation into and re-organisation of the ownership of private commercial banks, to weed out the possibility of insider lending that has plagued Nepal Bank. The Rastra Bank's role would be to function as a strong regulator, for which there would be a stronger law, possibly in the compilation of all legislation relating to the financial sector as one Act.


LATEST ISSUE
638
(11 JAN 2013 - 17 JAN 2013)


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