Despite strong lobbying by promoters of banks and financial institutions (BFIs), lawmakers have decided to keep it intact the provision of two terms’ tenure for chairman and CEO of BFIs in the new bill on Bank and Financial Institution Act (Bafia).

The bill is awaiting final amendment at the Parliamentary Finance Committee (PFC). 

Prakash Jwala, chairman of the committee, said they have almost reached towards conclusion on contentious issues. 

“We have decided to fix the tenure of chairmen and CEOs at two terms,” he said, adding for incumbent chairman and CEOs, however, the provision will be applicable only after their current tenure is over.

The committee will finalise the draft by May 25 and send it to the Parliament, according to Jwala.

Although the provision on terms of BFI executives has already been adopted in the NRB directive, the central bank has sought to include it in the Act to establish a norm.

“NRB is for fixing the tenure in order to curb anomalies in the financial industry,” said an NRB official. “The central bank is of the view that a person holding the position of chairman and CEO for a longer period may result in the breaching of good corporate governance.”

At Friday’s meeting of the committee, Governor Chiranjeevi Nepal said lawmakers becoming chairmen and directors of BFIs would result in conflict of interest. Also, given lawmakers are senior to the governor, “it is not suitable” that they are directed by the governor, he said. The draft Act, however, is mum over this issue. 

Meanwhile, the lawmakers have agreed put in place a provision, under which BFIs have to allocate 1 percent of the publicly issued shares for their employees, according to Jwala.

As per the existing Act, the BFIs have to allocate 5 percent of the total shares to their employees during the initial public offering (IPO). However, the draft Act had previously scrapped the provision stating such an allocation will reduce the general public’s holding.

The committee members came to a conclusion BFI employees too have the right to hold shares of the organisation they are working for. “Hence, we decided to allot 1 percent shares to the employees,” said Deepak Kuikel, a member of the committee.