NRB’s dividend payments could drop due to quake

- POST REPORT, Kathmandu

Jun 17, 2015-

The government is looking at a drop in dividend payments from Nepal Rastra Bank (NRB) from this year’s profits as three of its office buildings were damaged by the quake and the banking sector itself is going through hard times, a senior NRB official said.

NRB Deputy Governor Maha Prasad Adhikari said on Wednesday that dividends could drop significantly from last year’s figure of Rs7 billion due to the costs of rebuilding infrastructure destroyed in the disaster. According to him, NRB suffered losses amounting to Rs2 billion due to the damage caused to its buildings.

The deadly April 25 earthquake and aftershocks damaged three old buildings of the central bank at Baluwatar, Thapathali and Sundhara in Kathmandu. The central bank has been forced to relocate its offices elsewhere due to the destruction.

Besides the physical damage to the buildings, NRB’s earnings could be affected as the various fees that it collects from banks and financial institutions are likely to drop due to the damage suffered by the banking sector.

According to the Post-Disaster Need Assessment (PDNA) report, the financial sector that includes the insurance sector suffered the third largest business loss due to the earthquake after tourism and housing and human settlements. The business losses of the financial sector amount to Rs26.89 billion while the physical damage suffered by the sector has been valued at Rs4.39 billion.

Speaking at an interaction entitled Post-Quake Economic and Development Paradigm of Nepal organised by the Institute for Financial Education and Communication Nepal, Adhikari said that the central bank was committed to not letting any banking institution fail as a result of the earthquake.

The central bank has asked for the damage status of the properties and the collateral put up by borrowers so that it can devise the necessary policies to address them. In particular, the banking sector is vulnerable to defaults on home loans and real estate sector loans.

While banking is one of the sectors facing huge challenges, another sector that is in dire straits is the real estate sector. The Central Bureau of Statistics (CBS) in its recent National Account Estimate report said that the realty sector was expected to grow by just 0.77 percent against the anticipated 4.86 percent due to a downturn in real estate transactions and residential facilities in the wake of the disaster.

National Planning Commission (NPC) Vice-Chairman Govinda Raj Pokharel said that as the real estate sector in the Kathmandu Valley was most likely to suffer with a drop in loans for housing projects, it should be developed outside the valley where there has been no or little impact from the quake. The suffering of the real estate sector is also a worry for the banking sector whose exposure to the sector is still high.

A trade deficit and inflation are other worries for the next fiscal year as road blocks caused by landslides and shrinking output will send prices skyrocketing. With domestic production likely to suffer, imports are bound to rise increasing the already high trade deficit.

The executive director of the Institute for Financial Education and Communication Nepal Achyut Wagle said a poor government mechanism could result in a risk of increasing inflation and trade deficit. “With the government failing to address the consumer cycle mainly in rural areas, it could affect rural production that could build up pressure for non-monetary inflation,” said Wagle.

Participants also criticised the government’s rehabilitation and reconstruction programmes for being urban-centred. Lack of coordination among government agencies, absence of accountability among the officials deployed in rural areas and absence of technically sound mechanism have also been blamed for the slow recovery and reconstruction process.

India to help Nepal’s recovery

Indian Ambassador to Nepal Ranjit Rae said India would now focus on helping the recovery programme of Nepal after helping it in relief measures. According to him, India has so far provided IRs6.4 billion in rescue and relief work for the earthquake victims. The Indian envoy urged the government to focus on financing for specific programmes at the micro level in earthquake-hit areas. “The major concern should be on developing capacity and ability to spend the funds effectively instead of just focusing on raising more money,” said Rae, adding that there was a need to spend on physical infrastructure, business enhancement and improvement of society’s wellbeing in the aftermath of the earthquake.

Published: 18-06-2015 08:19

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