E-Kantipur

KATHMANDU, DEC 26 -

The Nepal Rastra Bank (NRB) has decided to exit from the Nepal Bank Limited’s management after four months. It has also decided that under the Financial Sector Reform Programme the chief executive officer of Rastriya Banijya Bank (RBB) will not get salary after three months.

The central bank board meeting held last week took the decision to this effect. NRB has already sent letters to the concerned banks informing them of its decision. According to the letter sent to NBL, it will have to appoint a new CEO by mid-April. NRB has set criteria for appointing a new CEO in NBL and his terms of reference after the appointment.

The letter sent to Rastriya Banijya Bank (RBB) says that the bank itself must pay its CEO with effect from April 1, 2011.

RBB’s CEO is currently getting salary from a grant component of the Financial Sector Reform Programme. The grant component will no longer exist from mid-March next year.

In its letter to NBL, NRB said that the bank’s board should start the process of appointing a new CEO by mid-March and complete the process by mid-April, paving the way for complete withdrawal of the management team assigned by the central bank.

Among the terms of references set for the new CEO are that the bank should prepare a recapitalisation plan and implement it within the next two years to turn the bank into a healthy financial institution; overall non-performing loan (NPL) should not cross 5 percent and there should not be more than 1 percent NPL for good loan; the new CEO should be able to continue maintaining profitability of the bank, maintain good corporate governance and ensure internal control system is not right  place; and the bank should prepare new human resources plans for new employees.

 “NRB wants NBL to call the annual general meeting to elect new board members after two years after accomplishing the aforementioned jobs and the current board appointed by the central bank will be replaced with the new one,” said a senior official of NBL.

NRB had reconstituted the management team of NBL by calling back two members of the three-member team assigned by the central bank on Nov. 17. The reconstituted management team is now being led by the current head Maheshwor Lal Shrestha who will continue to head the bank until a new CEO is appointed.

NRB governor Yubaraj Khatiwada has been maintaining that the NRB would no longer manage the NBL and soon call back its management team, saying that the central bank being a regulator should not run a bank for a long time.

NBL has been under the control of NRB since 2002 after it was declared crisis-ridden due to its negative capital as a result of widespread default on loans.

On other hand, whether the RBB management would retain current CEO Janardan Acharya after March is debatable, given that the CEO is no longer getting salary under the financial sector reform programme. Acharya said he was unsure whether the RBB board would give him an extension. “It is also not clear whether the terms of reference will be same even if I am asked to continue,” he added.

Acharya said he was ready to quit any time if the bank didn’t want him to continue. Both the banks are still far from becoming healthy financial institutions although there has been change in their working styles.

The net worth of RBB is negative by Rs 10 billion, while it is negative by Rs 5 billion in case of NBL as of the end of the last fiscal year.

Around Rs 7 billion is being spent on the reform programme, but the banks’ future has not been assured yet. The programme itself is expiring by December 2011.

The government has been maintaining that it doesn’t want to continue the programme with foreign loan.

Posted on: 2010-12-26 08:37

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