 |
Kathmandu Sunday January 13, 2002 Paush 29, 2058.
|
Under WB pressure, two commercial
banks to go private
By Prem Khanal
KATHMANDU, Jan 12 :With the World Bank, the
principal lender, tightening the government’s screws, the Finance Ministry is finally
handing over the management of the country’s two largest commercial banks to private
company within a month, a highly-placed source at the Ministry said here today.
Irked by the 21-month long controversy that
shrouded the management hand-over of these banks, the World Bank has warned that it would
retract the promised loan assistance if the process is not completed by February 15.
The WB issued this warning in a letter sent to the
Nepal Rastra Bank (NRB), the central bank, recently, Ministry officials said. "The WB
has cited increasing pressure from its headquarters as the reason behind its latest
stand." This is the fifth time that the WB has set the deadline, according to the
officials.
The WB has said that if the process still does not
finish within the stipulated time, it would be difficult for them to get final approval
from the bank’s board meeting slated for July, the source said. The board of the WB
is scheduled to approve the loan assistance worth Rs 830 million during this board
meeting. All the expenditures required before final approval are being made available
through a WB fund for Project Preparation Facility.
However, the government officials are hopeful that
the processes of management hand-over would complete before the WB deadline. "The
final agreement of management hand-over of Rastriya Banijya Bank, one of the two ailing
banks, would be signed on January 28," informed the source.
If everything goes as planned, the agreement
between NRB and Deloitte Touche Tomatsu, a US management company, would be signed on
January 28, according to the Finance Ministry.
Earlier, the WB had pointed out the need to add
some clauses in the agreement to prevent an easy way out of the contract winner after the
completion of the contract period. According to a NRB source, World Bank had argued if the
contractor makes an easy way out just by recommending for liquidation of the bank, there
will be no use of investing Rs 830 million.
However, government officials are confident that
some sort of solution regarding the concern of the WB would be found before January 28.
In December, a team of Deloitte Touche Tomatsu, an
international consultant, was in the capital to negotiate for the management hand-over of
RBB after the NRB approved its financial proposal.
The company’s bid, with US$ 5.9 million as a
consultant fee, was the lowest among the bidders. The nearest rival Arthur & Anderson
had quoted US$ 8.1 million for the two-year management contract.
Similarly, the management hand-over process of
Nepal Bank Limited (NLB) has also entered into the final stage. Among the three competing
contractors to takeover the management of NBL, Price Water Rice Cupers has quoted the
lowest price demanding US$ 4.95 million in its financial bid, whereas the other two
companies, ICC and Earnest and Young International have demanded US$ 4.98 million and US$
8.69 million respectively.
The central bank is expected to invite Price Water
Rice Cupers for the final negotiation within a week.
The management contract of the banks will be
initially for two years, which could be extended for one more year. The management team,
among others, will be responsible for; taking complete control of day to day running of
the banks, providing immediate help to stabilize the banks’ operation and restore
their financial health to an acceptable level.
Donor communities had been pressing the government
to speed up its financial reform process. The International Monetary Fund and the World
Bank had even threatened to freeze all loan flow until the management of the two is not
transferred to the private consultants.
The government had embarked upon the
management-transfer-project after KPMG Barnet, an international auditing, had declared the
two banks technically insolvent in its report last year.
Other Stories
|
