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Kathmandu Thursday January 24, 2002 Magh 11, 2058.
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‘Expedite reforms in
financial sector’
Post Report
KATHMANDU, Jan 23 Banking and financial experts
at an interaction programme have stressed that the present pace of financial sector reform
must be accelerated to avoid a possible financial crisis in Nepal.
The interaction programme held today precedes
the Nepal Development Forum (NDF) meet scheduled for February 4-7 in Kathmandu and
Pokhara.
Experts pointed out that soaring Non Performing
Assets (NPA) of the commercial banks might cause a meltdown in the banking system. They
also flayed the central bank for not being able to take appropriate actions on time.
Presenting a paper on financial sector reform,
Dr Tilak Rawal, Governor of Nepal Rastra Bank (NRB), poor financial condition of the two
largest banks is the major problem of the Nepali financial system.
"The major cause of concern is the poor
financial position of Nepal Bank Limited (NBL) and Rastriya Banijya Bank (RBB), which
contribute around 60 per cent to the national banking system," he said. However, he
clarified that the overall economic condition has not become ungovernable.
Highlighting the various activities of the
central bank, he said that various steps have been adopted to empower monitoring and
supervision capability of the banks so that it may help in maintaining financial
discipline.
Thakur Pant, a leading banker, warned that the
banking sector would have to face more challenges in future due to sliding economic
condition of the country. "The directives of the central bank is being implemented at
a time when the whole economy is dwindling. And that has made operation more difficult for
the banks," he said.
Professor Bishomwar Pyakhurel said that the
government should be honest in fulfilling the commitments that it made during the last
meeting of the Nepal Development Forum (NDF) in Paris.
"The government had committed to carry out
more than 93 programmes related with reforms in 8 sectors during the last NDF meet.
However, the overall performance of the government is less than expected," he said.
The government has initiated on a little over 60 per cent of the commitments made in the
financial sector reform during the Paris meet.
Narendra Bhattarai, president of Nepal Bankers
Association (NBA), said that the NPAs of the commercial banks could go up if the economy
is not revived soon. "Though the present NPAs of the private banks are within the
international marks, it would not take a long time to surpass that mark if the current
economic slowdown persists," he added.
He also stressed on the need of a banking
training institute to generate trained banking manpower and urged the central bank to play
a lead-role in that direction.
Lawrence De Milner, Resident Representative of
the International Monetary Fund (IMF), said that weak supervisory and legal framework of
the central bank is the prime cause of the present problems in the banking system. He also
said the dual policy adopted by the central bank, one for the state-owned banks and other
for the private banks, needs immediate correction.
Economist Minendra Rijal expressed concern over
the sliding banking investment in the agriculture sector that provides livelihood for the
major chunk of the population. "Banking investment in agriculture used to be 13 per
cent of the total investment in 1990, which in 2001 declined to a mere 8.9 per cent,"
he said.
He said that stimulating financial reforms is
important to safeguard the whole economy. He also stressed on the need for adequate
preparations before enforcing new regulations.
Rajendra Kumar Khetan, a leading industrialist,
on the occasion expressed dissatisfaction that despite numerous assurances, the government
did not consult with the private sector before announcing a number of decisions relating
to the financial sector.
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