Rastra Bank issues new directives

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KATHMANDU, Jan 8: In order to safeguard the interests of depositors and to make the functioning of financial institutions more organised and dignified by enhancing transparency and competition, Nepal Rastra Bank (NRB) has issued a new directives.

The directives, among others, have also made some changes with regards to capital fund requirements and deposit collection by finance companies.

According to a press release issued by the central bank here today, the new directives have been issued as per the Nepal Rastra Bank Act 2012 and Finance Company Act 2042, and would be effective from February 14, 2002.

As per the new directives, the capital fund of 10 per cent would consist of 5 per cent core capital, while the rest would be covered by supplementary capital for the current fiscal year. However, the finance companies will have to arrange for 5.5 per cent of the core capital to increase the capital fund to 11 per cent by the end of fiscal year 2002/03, and to 6 per cent the next fiscal year to increase the capital fund to 12 per cent.

Similarly, finance companies can collect financial resources up to 12 times of the capital fund by taking prior permission and confining themselves within the specified conditions of the central bank

Likewise, finance companies will have to maintain liquidity of at least 8 per cent of the total deposits, out of which at least 3 per cent will have to be in cash either in their own vaults, or with the NRB or in a current account of a commercial bank.

The new directives has also reduced the categorisation of loan investment of the finance companies into 4 classes against 5 in the previous arrangement. Under the new arrangement, loans that have not been defaulted by over 3 months will be put under the good loan category. However, the loan would be put into the inferior category if it is defaulted by 3 to 6 months.

Similarly, suspected loans would be those that have been defaulted by 6 to 12 months and any loans defaulted by up to 1 year will be put in the category of bad loans. The finance companies will have to arrange for at least 1 per cent, 25 per cent, 50 percent and 100 per cent in provisions for loan loss for the above four categories.

The directives has also divided loans into active and passive classes and the passive loans would be rescheduled or restructured as per specific rules. The new directives has also made changes in sectoral loan investment, sale of promoters’ shares, auditing and distribution of net profit and dividends.

Furthermore, the directives has laid emphasis on good governance under which it has issued clear cut direction on the appointment of the board of directors, the code of conduct of the directors and employees and their accountability and responsibility, appointment of chief executive and appointment of the auditing committee of the finance companies.

Similarly, the new directives has also banned extension of loans by the finance companies to its board members, shareholders or employees, including their relatives. Likewise, promoters would not be allowed to sell their shares before the completion of five years of operation of the company. Also, sale of such shares would not be allowed before shares are issued to the general public and before it is listed in the stock exchange. The distribution of dividends, including bonus shares, has been banned until the company issue shares to the general public.

Air India lands in Nepal

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KATHMANDU, Jan 8:An Air India aircraft landed on the soils of Nepal for the first time to bring the Indian Prime Minister Atal Bihari Vajpayee to Kathmandu on the occasion of the eleventh SAARC summit.

According to a press release issued here today, the operation of Air India flight was assisted by the Nepali government, Civil Aviation Authority of Nepal, Royal Nepal Army, Nepal Police, Tribhuban International Airport and Royal Nepal Airlines Corporation.

Women empowerment stressed

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KATHMANDU, Jan 8:Binod Bahadur Shrestha, first vice-president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI), has said that women empowerment through the development of entreprenurship is very important to boost the overall economic activities of the country.

Speaking at a program organised here today to launch the WINNER Help Desk, Shrestha added that FNCCI has been conducting various programmes to ensure smooth development of women entreprenurship. " With a view to concentrate specially on the development of women, the FNCCI has just established a separate women division in the centre and more than 21 district level women entrepreneurs’ organisation have come into operation," he said.

He also said that the government should also be very serious in bringing plans and policies related to women entreprenurship and added that the upcoming Tenth Plan should also bring specific plans and polices in this regard.

Chandani Joshi, South Asia Representative of UNFEM, said that despite various attempts, exploitation on women continues to be a major hurdle in empowering women from all sectors. She also said that organised women activities have become essential to safeguarding rights of women in the present context of globalisation.

Appreciating the WINNER campaign in Nepal – a campaign to empower women through information technology – Joshi said that the similar programmes have been launched in Bangladesh.

Meera Bhattarai, Chairperson of Fair Trade Group, highlighted various activities of the group and said that the main aim of the group is to establish a system of fair treatment to consumers and other related parties.

Among others, the objectives of the newly launched WINNER help desk is to help bring women entrepreneurs into the mainstream of global market by making them familiar with modern internet-business and with international trade in the context of globalisation.

Businessmen flay VDIS, MP points loopholes

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KATHMANDU, Jan 8 :Business leaders today expressed mixed reaction to the Voluntary Disclosure of Income Scheme (VDIS), a programme introduced by the government to bring the potential taxpayers into the tax net, arguing that the scheme is shrouded by confusion.

Participants at a day-long talk programme on VDIS, organised by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), expressed the views that the scheme should be applicable to all the people irrespective of their positions.

They said that the lawmakers should first declare their property so that other people could emulate them, making the scheme non-discriminatory.

Ravi Bhakta Shrestha, FNCCI President, said that if the scheme is targeted at the businessmen alone, the business community would oppose the scheme. "However, we are ready to cooperate the government on if it is introduced to bring all the potential taxpayers into a tax net irrespective of their profession," he added.

"VDIS should be imposed on them who are out of tax net. We are in favour of punishing the tax evaders, but if it creates hassles to the business community, we will oppose it," warned the chief of the business leaders.

The entire industry and business is passing through a slowdown, further weakening the already fragile economy and we are asking the government to introduce some rescue packages. The government has instead imposed such a scheme at a such a critical time, he lamented.

Pavan Ojha, Legal Advisor to the FNCCI, said that clause 42 of the Income Tax Act is not clear on who should declare property. It is a confiscatory law that is against the spirit of the Act. It gives more power to tax administrators as it does not specify the procedure of investigating into the property of an individual, he added.

Dr Roop Jyoti, an Upper House member, flaying the VDIS, said that it was either a political gimmick or an opportunity to turn black money into white one. He alleged that the government was intimidating the business community to raise additional revenue to meet the growing security expenses.

Instead of focusing so much on income tax, which constitutes a mere 5-6 per cent of the total revenue, the government should concentrate on strictly enforcing the value added tax (VAT). "Tax officials cannot make money through VAT collection, as it is transparent. So they are after the VDIS," he alleged.

Weak implementation of VAT is weakening the national economy, the government should pay due attention to it, he added.

The VDIS has many loop holes. For example, the existing law requires a taxpayer to keep a record of only 5-6 years. "So on what basis does the government collect income tax under the scheme?," he questioned.

Pashupati Giri, former president of the FNCCI, said that the business community should not dread the VDIS as it is targeted at all income earners. But the government has no moral right to collect such tax from other people unless the ministers, parliamentarians, tax administrators and high-ranking government officials also declare their property, he said.