Few new programmes for financial sector

- RAJESH KHANAL, Kathmandu

Jul 13, 2014-

Except for the cooperative sector, the new budget doesn’t have any new measures for the financial sector, although it talks about introducing various measures for the improvement of banks and financial institutions (BFIs), cooperatives and insurance sectors.

The government has planned to amend the Nepal Rastra Bank Act 2001, Bank and Financial Institutions Act 2006 and Banking Offense Act 2007. The budget said these acts would be tabled in the ongoing session of the Parliament.  An amendment to the existing Insurance Act has also been planned.

It also talks about giving continuity to the policy of merger and acquisition of banks and financial institutions (BFIs).

As part of its financial sector reform plan, the government would operate a national-level rural development bank which will be formed after the merger of five existing rural development banks, which is now in final stages.

In a bid to better regulate and monitor micro-finance and cooperatives, the budget talks about a separate Act. “The government will table the bill on deposit and credit security in the legislature during this session of Parliament,” states the budget.

Other plans include enforcing provisioning in cooperatives if case of bad debt. “A provisioning of 5 percent will be made mandatory for the entire savings and credit cooperatives,” states the budget. Currently, this provision is compulsory only for cooperatives licensed by the Nepal Rastra Bank.

In addition, the budget also aims at establishing a Cooperative Deposit and Credit Security Fund.

The fund is expected to provide a back-up for cooperatives if they fail to recover loans. The government has allocated Rs 40 million to establish cooperatives and poverty monitoring information system.

Gauri Bahadur Karki, former chief of a high-level probe panel on cooperatives, termed the introduction of the measures for regulating the cooperatives sector a “positive move”.

He however, expressed dissatisfaction over the government’s reluctance to adopt the suggestions recommended by the panel.

In its report submitted to Prime Minister Sushil Koirala, the panel had suggested a new Cooperative Act and formation of two powerful bodies — Rehabilitation Commission and Deposit and Credit Tribunal — among others.

Sushil Ram Mathema, a member of the panel, said the government should have to focus on formulating necessary laws like the Cooperatives Act and Deposit and Credit Tribunal Act.

“Whatever measures the government has sought for the purpose will turn ineffective in the absence of these acts.”

For the development of the capital market, the government has once again talked about allowing Non-Residential Nepalis (NRN) to invest in the secondary market by amending the NRN Act 2007 and NRN Regulation 2009.

For the modernisation of Nepal Stock Exchange, the budget plans to introduce a foreign strategic partner in fiscal year 2014-15, and adopt fully-automated trading system.

The government would also give priority to merger of insurance companies to promote competition. It would offer the same facilities offered to commercial banks to insurance companies going for merger.

The budget also plans to establish a re-insurance company through the insurance pool maintained in partnership with insurance companies. The authorised capital of the re-insurance company would be Rs 5 billion.

Published: 14-07-2014 10:21

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