Banking sector in good liquidity position
‘Recent withdrawals will have no adverse impact’

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KATHMANDU, Aug 21 - Banking officials have said that the recent "abnormal" withdrawals from the commercial banks will have no adverse impact on the economy since the amount involved is very nominal compared to the total deposits.

The assurance from the banking sector follows the unusual withdrawal from the banks after the Prime Minister Sher Bahadur Deuba’s recent announcement to freeze land transactions.

"The motive of such withdrawals is to segregate huge deposits into smaller ones through inter banking deposits transfers," said Narendra Bhattarai, president of Nepal Bankers’ Association.

The withdrawal cases suddenly surged after some of the major political parties demanded that along with the new land reform policy that will draw a limit on individual land holding the government should also announce property limitations.

Talking to the pressmen here Tuesday, Bhattarai said that a total of only Rs 400 million were withdrawn after the PM’s announcement. "However, the Rs 400 million out of the total banking deposit of Rs 170 billion will not have any remarkable effects on the overall liquidity position of the economy," he assured.

He also informed that the present depositors withdrew in a bid to break their bulk deposits in smaller pockets that would fall within the expected limit. Rumors are high on that the government under political pressure will limit property holdings.

Bhattarai also said that the lending of the banking system has frozen due the government’s announcement to freeze the transaction and registration of land. "The decision has severely affected the normal functioning of banks since almost 80 per cent of the total loans are sanctioned against land as collateral."

The announcement has created havoc among the banks as they have extended huge amount of loans on land collateral. Freezing the sale of land would naturally affect the recovery of bad debts through land auction.

Furthermore, if the land offered as collator falls beyond the limitation and is seized by the government, then the banks will not be able to recover their investment. Bhattarai informed that a meeting of the association has demanded with the government to make necessary arrangement to minimize the risk upon the banking system.

"As per the present announcement, we cannot auction the land kept as the collateral for next six months, which will create serious imbalance in the flow of funds," he said.

Either the government should be ready to compensate the losses of the banks or should free auctioning of such land that are under the banks’ ownership as collateral, he added.

If concrete steps are not taken on time, the uncontrollable soar in the liquidity will swell the non performing assets of the commercial bank to 50 per cent from the present 30 per cent, he warned. "Such a situation may lead some banks into bankruptcy as well, which will then propagate into the other healthy banks," he said.

He also requested with the government to review the recently enforced directives as the socio-economic condition of the country is not in good health. "In the present context of deteriorating business environment, some of the provisions of the directives, particularly that on loan classification and loan loss provisions should be relaxed," he said.

‘Depositors need not to worry’

KATHMANDU, Aug 21 (RSS) - The Nepal Rastra Bank (NRB) has said that there is no need for the depositors to get panicky as the commercial banks have a huge fluid fund.

Monetary economists have spoken of the need for the NRB to increase its investment to make use of the fluid fund. They are of the view that law and order is a precondition to create the environment for such an investment.

As regards the news reports published in various newspapers that the financial condition of the country is getting deteriorated every day and the depositors are not likely to get back their amounts deposited in the banks, NRB Governor Dr Tilak Rawal, talking to RSS, said the Banijya or commercial banks have now an amount of Rs 46 billion in the fluid fund.

Stating that Rs 14 billion has been invested in securities, Dr Rawal made it clear that the NRB and commercial banks can easily supply up to Rs 60 billion.

The commercial banks have a total deposit of Rs 157 billion out of which Rs 105 billion has been issued as loans.

Speaking of the need to minimize the fluid fund by issuing loans, the NRB governor remarked the commercial banks can make use of the fluid fund by issuing loans on demand of businessmen, entrepreneurs and farmers.

The banking system is in order and the only problem with us is how to invest it, he further said.

Fears that there will be a freezing or ceiling of property in the financial sector as has been done to the land are baseless, the NRB governor made it clear that the bank has not thought of making changes in the monetary policies right now.

Action against trade defaulters initiated

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KATHMANDU, Aug 21 - With a view to curb the increasing cases of consumer rights violation, Department of Commerce (DC) has initiated action against associations, organizations and institutions that are involved in carrying out unfair trade practices.

This is the first time that such action has been initiated by any government department. Facing the heat of the DC’s actions would be those who involved in cartel, joint price fixing, artificial scarcity creation and tied selling, among a host others.

In the first phase, the DC has begun to give formal warnings and asking for clarification from those involved in collective price fixation. The DC is also formally communicating with the government agencies that govern the related institutions.

The DC sent letters Nepal Barber’s Association, Meat Selling Association, Federation of Transport Entrepreneurs, Transport Management Department and three District Administration Offices in the valley asking for clarification.

The action of the DC is in line with the provisions of the Consumer Protection Act, 1997 and Consumer Protection Regulation, 1998 that try to protect consumers from being exploited through anti-competitive trade practices.

Director General of the Department, Krishna Hari Baskota, talking to The Kathmandu Post, said that letters have been sent to the accused and also the government agencies that govern them. The agencies themselves would take the punitive measures.

"We will monitor if the related authorities take action. If they fail, we will intervene and take the necessary action," he added.

There are an ample number of cases in which businessmen form cartels and syndicates to fix prices collectively. New businessmen into the field would be forced to go by the decisions of the cartel or face punishment. Such unfair marketing has become a custom in most businesses.

The dial system of transport management in the country is the most prevalent anti-trade practice. A majority of transport entrepreneurs has formed local syndicates, allowing plying only for syndicate members. They have not only prevented new entrepreneurs from entering the transport business, but are also involved in vandalizing buses which trespass the demarcation of different syndicates.

Ironically, while the government adopted liberalized and free market economy about a decade ago, it also made a provision in the Transportation Act, 2049, in 1994, allowing the practice of dial system, which is against the philosophy of free market. The provision on dial system was introduced when the previous Act, which did not allow dial system, was vehemently opposed by the transporters, who went into strike for 15 straight days.

Birgunj is the only place where the dial system does not exist. Other places like Rajbiraj, Janakpur, Gaur and Malangwa are slowly moving towards adopting competitive policy. Apart from these places, transportation system in other places, including Kathmandu and Pokhara, fall under the dial system.

Syndicate members obstruct the entry of new entrepreneurs. Agni Transport Service had announced to operate in the Kathmandu-Pokhara sector independently, but could not due to opposition from the syndicate. Similarly, Makalu Travels, which independently joins Kathmandu with most towns of eastern Nepal, has not been able to enter the Pokhara sector.

Similar is the case of barbers. Nepal Barbers Association has fixed the price for hair cutting at Rs 20. However, action is taken against those who do the job for below Rs 20. In the like manner, the price of meat in the valley is also fixed collectively.

Mushrooming cyber cafes lure costumers

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KATHMANDU, Aug 21 - Burgeoning cyber cafes and communications centres in the capital are offering international calls at unexpectedly low rates through internet telephony, which has come as a relief to customers who were otherwise forced to pay 15 times higher charge for the same call.

Internet telephony is a phone call made through internet by entering into a particular website and encrypting code number and typing the desired number. The operator of the service pays the international operator in dollars.

Before internet telephony came into use almost two years ago, callers were forced to pay Rs 140 per minute. But no more. Now it costs as low as Rs 5 and as high as Rs 15 a minute to make a call in the US.

The reason behind the incredibly low charge for internet telephony is that some international websites offer free calls packages. Now they have begun charging a few cents. The local service providers just take a nominal charge to meet their operation cost.

Mostly local youths and foreigners throng the cafes and centres for their unimaginably low price for international calls, internet browsing, email and for net chatting.

Sanjeev Shilpakar of Cyber Lounge, Thamel says, "Mostly foreigners and local youths visit my cyber shop for email and internet phone. Even foreigners are surprised at the low price for international calls".

In keeping with the demand of users, such cafes and centres have upgraded the internet telephony using special gadgets like IP Star, Yap Jack, Info-Talk etc., which have better sound quality than the internet phone but inferior to that of the fixed phone. Charges range from Rs 15 to RS 30 depending upon service quality. But it is the price that matters.

Operators of such cafes and communications centres say that though they offer long distance calls at very nominal charge, their profit margin is also good in the business.

Sanu Raj Ranjit of Last Minute Communications says, "We have better profit margin in internet phone as the volume of transaction is growing".

Bharat Poudel, who works for a trekking agency often visits cyber cafes, says with the opening up of such cafes communications has become much faster and easily available. The charge for internet browsing has gone down to Rs. 20 per hour and email Rs 10 for 1 kilobyte message.

"Phone, fax, email etc are easily available now and their prices are going down while the service quality is improving. It has helped many users like me to acquire information on various issues," he says.

Owners of cyber cafes and communications centres especially in tourist areas like Thamel, Bhaktapur and Patan Durbar Square, say that international calls through basic phone has plunged by over 80 per cent following the introduction of the new system.

Raju Adhikari, owner of Skysurf Internet Cafe, Thamel, says, "With the growing attraction towards internet phone, the long distance international calls made through fixed phone has gone down by 80 per cent recently".

However, Padma Malla of Worldwide Communications at Bhaktapur Durbar Square, has different views. She says, "In the beginning of internet telephony, the call made through fixed phone had plunged, but due to its quality, callers are slowly coming back to fixed phone for long distance international calls".