National 5 (Spotlight Weekly)

Problems Of Performance

Nepal Rastra Bank organizes two-day workshop to discuss ways to overcome challenges posed by the huge amount of non-performing assets

By A CORRESPONDENT

As the country’s financial institutions are facing major economic debacles due to bad debts, the Nepal Rastra Bank has been pushing its financial reforms package to change the situation. Under the leadership of young and energetic governor Dr. Tilak Rawal, Nepal’s central bank is making an all out effort to implement reforms.

Thanks to the strong leadership given by the Nepal Rastra Bank, the country’s two major commercial banks are gradually recovering from the state of virtual collapse.

Recovery of non-performing assets is one of the major problems of all the commercial banks as large amount of money are invested in land, houses and other such areas. At a time when large volume of Nepal’s commercial banks’ have investment turned into non-performing assets, Nepal Rastra Bank recently organized a two day workshop to discuss the matter.

Organized with the collaboration of the Bank of Korea and Bank of Nigara, Malaysia, central banks of the respective countries, the two-day workshop was attended by governors and senior officers from both the countries.

“Although Nepal is in crisis but we cannot wait until it is over to initiate reforms in financial sector,” said Dr. Tilak Rawal, governor of Nepal Rastra Bank, presenting examples of various countries where reform measures were successfully initiated even when those countries were under serious political and economic crisis.

In view of the large amount of non-performing assets in the Nepalese banking system, like in Rastriya Banijya Bank (RBB) and Nepal Bank Limited (NBL), the workshop helped Nepalese bank officials to understand how banking sectors in Korea and Malaysia handled such crisis.

“Three should be will and unity between the government and the people to work together for development of the country and also a sense of self sacrifice to endure the hard days of crisis,” said Dr. Sesung Park, governor of Bank of Korea. “Nepal’s future looks very promising, provided the government and people can unite in their determination for betterment and pursue a plan for economic development in line with the changing global environment. Besides this, it borders with China and India, which are the largest and most rapidly growing markets in the world.”

The program was also participated by governor of central bank of Bangladesh. Bruce Henderson of the RBB also presented an overview of banking environment in Nepal.

In Nepal, the average level of non-performing asset (NPA) stands at 30 percent. But this stands at whopping 52 and 62 percent in the RBB and the NBL respectively.

“Astounding level of NPA has caused anxiety and become a matter of concern. The situation is even worse in case of the two banks RBB (52 percent NPA) and NBL (62 percent NPA) which together account for 37 percent of the total deposits of some Rs.200 billion and 40 percent of the total loan outstanding of Rs.150 billion of the banking system,” said Dr. Rawal.

Participated by 52 participants from various commercial banks of Nepal, the two day workshop analyzed various difficulties and challenges faced by the commercial banks in Nepal in the process of loan recovery. Although the commercial banks are receiving strong backing as well as the technical support from the central bank, the recovery process is yet to pick up.

Despite lapses and hurdles, Nepal Rastra Bank has made tremendous progress in the last two years in area of recovery of bad debts. At a time when the country’s political system is unstable, it is not easy to make quicker progress.