Kathmandu: Nepal Rastra Bank (NRB) Governor Dr. Bishwanath Paudel is set to hold a crucial discussion on Wednesday with the chairpersons of commercial banks.
The meeting will take place at Hotel Soaltee in Kathmandu. This follows his Tuesday meeting with the Chief Executive Officers (CEOs) of commercial banks, where similar concerns were addressed.
The primary agenda for Wednesday’s meeting centres around three key issues: the proposed amendment to the Bank and Financial Institutions Act (BAFIA), the second Financial Sector Development Strategy, and the effectiveness of the monetary policy for the current fiscal year 2025/26.
According to a letter issued by the Governor’s office to all chairpersons of commercial banks, the discussion will focus on three agenda items.
The first item on the agenda is a discussion on the monetary policy recently announced for the current fiscal year. The second agenda pertains to the long-term strategy for the development of the financial sector. The third and perhaps most contentious topic will be the ongoing parliamentary discussion on the proposed amendments to BAFIA.
A major proposal under discussion in the BAFIA amendment bill seeks to distinguish between bankers and businesspersons. Specifically, it proposes to reduce the threshold for “significant ownership” in banks from the current 2 percent to 1 percent. Furthermore, it suggests that individuals holding significant ownership in a bank should not be allowed to obtain business loans from that bank.
During Tuesday’s meeting, bank CEOs stressed that if the bill enforces a strict separation between bankers and entrepreneurs, the government must ensure that investors are provided with a clear and fair exit plan.
The amendment bill, currently under review by the Finance Committee of the House of Representatives, also proposes an expanded definition of “related parties” and aims to prevent conflicts of interest within financial institutions.
Although members of the Finance Committee, including government and central bank representatives, appear generally supportive of the proposed separation between bankers and businesspeople, there is broad consensus that more time is needed to implement these changes effectively.
However, uncertainty remains regarding what kind of “exit policy” would be available to investors who wish to divest their holdings in order to pursue other business ventures. Even Finance Minister and Governor Paudel have yet to clarify this aspect.
In Tuesday’s meeting with the CEOs of commercial banks, Governor Paudel acknowledged the importance of a well-thought-out exit policy and assured that both he and the Finance Minister are open to providing adequate time for its implementation.
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