Slow reforms in NBL worries central bank
Kathmandu, Nov 16 - Governor of Nepal Rastra Bank (NRB) Bijaya Nath Bhattarai said on Sunday that the failure on the part of Nepal to reform its ailing financial institutions before expiry of the ongoing financial sector technical cooperation project would invite the distrust of donors about the country's capacity to manage them.
The project, which started in 2002 with the aim of reforming the country's two largest banks, Rastriya Banijya Bank and Nepal Bank Limited (NBL), besides enhancing the capacity of the central bank, will expire in December 2011.
"If we fail to achieve the target set by the project before the date of its expiry, our performance will be considered weak in the eyes of donors, and the condition of NBL will remain confusing," Bhattarai said, speaking at the 73rd anniversary celebration of NBL. He said that NBL made some progress in certain sectors, but the reform process was slow.
"That's why the bank needs a clear roadmap," he added. Praising the bank for decreasing its non-performing loans (NPL) to Rs. 1.15 billion from Rs. 9.64 billion when the reform process started, the governor said the negative net worth, still big NPL and low productivity of its employees were the problems facing the bank. The bank's capital fund has remained negative by 14.54 percent which should remain positive by 10 percent as per the Basel norms. The central bank, which has kept NBL under its control for the last eight years, has failed to appoint an independent chief executive officer even after several attempts on the part of NRB.
Bhattarai said that the process of appointing a CEO would be completed soon. "But there is a procedural compulsion to make it fast as NRB should follow the guidelines fixed by the donors," he said. CEO of NBL Binod Atreya termed the bank's negative net worth that stands at Rs. 8 billion a big problem when the bank's paid-up capital has remained at just Rs. 380 million.
The bank is yet to recover bad debts of Rs. 6 billion although it recovered Rs. 2.2 billion over the last two years. "Even loans guaranteed by the government have not been recovered," Atreya said. He stressed the need to reduce the expenditure for employees which stands at around 60 percent of total expenses.
NBL starts e-commerce
Nepal Bank Limited (NBL) has started e-commerce service from Sunday which enables its customers to make payment for utility services such as mobile, electricity and drinking water.
The bank has also added two ATMs at Kalimati and Jawalakhel in the Kathmandu Valley, expanding its ATM counters to seven. "We aim to expand ATM services to additional 14 places," said NBL CEO Binod Atreya. The bank started providing education loans from Sunday.
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