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Praises, concerns galore
KATHMANDU, JUL 29 -
Praising the overall direction of the monetary policy, bankers on Thursday complained about some of its provisions related to corporate governance and banking expansion.
Speaking at an interaction organised by the Society of Economic Journalists of Nepal, bankers lauded the move not to issue permits to open new banks.
President of the Nepal Bankers Association (NBA) Sashin Joshi said that the central bank has addressed the association’s demand in this regard. “Keeping the door open for joint venture banks and financial institutions that aim to invest in infrastructure is, however, justified," he added. The bankers also praised Nepal Rastra Bank’s effort to encourage banks to go rural and promote micro finance activities. But they were critical of the provision requiring them to form a separate cell for micro finance and obtain the central bank’s permission to open new branches.
“The provision requiring NRB’s permission to open new branches will invite bureaucratic hassles," said Rajan Singh Bhandari, chief executive officer of Citizens Bank International. The bankers said they could not find justified logic behind the central bank’s decision regarding branch expansion. Earlier, they just had to inform the central bank if they wanted to open a new branch.
The policy said that the move had been taken to encourage banks and financial institutions to expand their presence in areas where access to finance is inadequate and ensure healthy competition.
The bankers were also critical of the provision increasing the portion of lending to the deprived sector, the cap on the salaries and benefits of CEOs and other top officials and the prohibition on putting up promoter shares as loan collateral.
The policy has increased the share of deprived sector lending from 2 to 2.5 percent for development banks and from 1.5 to 2 percent for finance companies. The portion of deprived sector lending that commercial banks are required to make remains unchanged at 3 percent.
The monetary policy said that the central bank would create appropriate provisions to make the salaries and benefits being enjoyed by directors, CEOs and other top officials compatible with the affordability of the country’s financial system besides making them digestible and transparent.
The bankers defended their salaries and benefits saying that it was natural for them to demand more facilities considering the responsibilities CEOs have to bear. “No bank offering a high salary to the CEO has faced big problems while government banks that pay low salaries have suffered huge financial crises," said Bhandari.
The policy has banned promoters possessing more than a 1 percent stake in banks from putting up 50 percent of their shares as collateral for loans. The bankers said it was unfair on promoters as they were already banned from putting up their shares as collateral for a five-year locking period.
Posted on: 2010-07-30 08:34
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