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Second phase reform to focus on ADB/N, NIDC
KATHMANDU, JAN 20 - After the first phase of banking sector reform programme that was targeted at state-controlled commercial banks – Nepal Bank Limited and Rastriya Banijya Bank, the central bank, today said that the second phase of reform programme would concentrate to reform Agriculture Development Bank (ADB/N) and Nepal Industrial Development Corporation (NIDC).
Dr Tilak Rawal, Governor of the Nepal Rastra Bank (NRB) talking to journalists today said that the second phase of reform is mainly concentrated at restructuring their organisational stricture to enable them to face the growing competition and to adopt healthy banking culture.
"The reform programs of both institutions are aimed at enhancing their competitive strength and to make self-sustained by making them able to withstand the growing competition," Dr Rawal said.
He also disclosed some of the findings of an in-depth financial study of two institutions and said that the financial position of NIDC is of more worrisome than ADB/N’s. "Though the financial health of the ADB/N does not have severe problems, but it is in an urgent need of concrete reforms to upgrade the financial condition up to a par," he further added.
According to Governor Rawal, the central bank has asked these institutions to submit their detailed restructuring strategies to upgrade their financial health and ensure better competitiveness. "Once we receive the strategies, the central bank will take decision over next steps to accelerate the reform program," he said.
Governor Rawal was commenting on the findings of a report of PriceWaterHouse Cooper, an international auditing firm, conducted in the financial assistance of the Asian Development Bank a year ago to find actual financial condition of the institutions.
As the report stressed the need of a complete overhauling of the NIDC to make it able to run effectively, the central bank is holding dialogues with the government over the necessary procedures to expedite the urgent reform measures of the NIDC, Dr Rawal said.
The central bank initiated a massive banking sector reform some five years ago after an comprehensive study reckoned that the largest banks of the country – Nepal Bank Limited and Rastriya Banijya Bank were technically insolvent.
The government initiated the first phase of banking reform by awarding the management contract of the banks to foreign consultants. Commenting over the progresses made so far in these two largest banks, Governor Rawal said, "Though the outcome of reforms is not pessimistic, but are below the expectations," Dr Rawal said.
He further said that as per the terms and condition of signed agreement, the central bank will thoroughly evaluate the progress and will sketch further strategy. "We will not turn back from what we had promised to the people and nation," he underlined.
Currently, the central bank is busy preparing the supportive acts and regulations. As per now, number of acts are being formulated and are in the last stages of enforcement. Asset Management Company Act, Banks and Financial Institutions Act, and Insolvency Act are some among the acts in the pipeline.Posted on: 2004-01-21 03:15
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