Kathmandu: A task force formed by Nepal Rastra Bank (NRB) to recommend reforms in the banking sector has put forward nine key suggestions, arguing that banks must play a more active role in fully reviving economic activity.
The task force, led by former NRB director and former chairperson of the Securities Board of Nepal, Dr Rewat Bahadur Karki, has recommended, among other measures, a review and reform of blacklisting regulations.
The task force has suggested that, without compromising the interests of depositors, regulatory and policy provisions should be relaxed where necessary to help lift the sluggish economy. It has also recommended the immediate revival of subsidised loan programmes by assuming responsibility for pending government subsidies, proposing that these be reimbursed through dividends that the central bank pays to the government.
Noting that many businesses have either shut down or are operating at a reduced scale since the COVID-19 pandemic, the task force has advised banks to provide additional credit to entrepreneurs seeking to restart or expand operations. Such lending, it said, should be based on business viability and adequate collateral. It also stressed that loan restructuring and rescheduling for collateral-backed loans should be allowed, provided that the protection of depositors’ interests remains the top priority.
The task force was formed by NRB Governor Dr Bishwanath Paudel with the objective of presenting recommendations for the overall reform and strengthening of the banking sector. Alongside Dr Karki as coordinator, the panel included former Nepal Bankers’ Association president Bhuwan Kumar Dahal as a member and NRB Executive Director of the Bank and Financial Institutions Regulation Department, Guru Prasad Paudel, as member secretary. The task force submitted its preliminary report on July 9 and its final report on July 15 to the governor.
The report was made public five months after its submission.
Among its other recommendations, the task force has called for easier access to business loans from banks and financial institutions, up to Rs 500,000 in rural areas and Rs 1 million in urban areas, against appropriate collateral. It has also proposed raising the loan limits for group-based lending by microfinance institutions and for collateral-backed entrepreneurial loans.
In addition, it has urged the adoption of targeted credit policies to encourage youth participation in IT and startup ventures, a comprehensive review and reform of blacklisting rules, and the development of effective mechanisms for coordination with the private sector.
Comment Here