Influential lawmakers, who also chair bank boards, have become successful in removing the term limit for bank chairmen in the bill on Banks and Financial Institutions Act (Bafia), ensuring their perpetual hold over banks and financial institutions (BFIs).

A sub-committee of the Parliamentary Finance Committee (PFC) formed under the leadership of Lawmaker Deepak Prasad Kuikel for the final amendment of draft Act lifted the term-limit for BFI chairmen.

Lawmaker Ichha Raj Tamang, who is the chairman of Civil Bank, is a member of the sub-committee. Lawmaker Umesh Shrestha chairs Prime Commercial Bank’s board.

The original draft Act had capped the number of terms for BFI chairmen and CEOs. But in the latest draft, only the CEO’s tenure has been fixed—for two terms.

The draft, which was tabled at the Parliament a few months ago, was sent to the committee for final amendment after preliminary discussion.

Prakash Jwala, chairman of the committee, said the committee will pass the final draft on Wednesday and forward it to the Work Management Committee of the Parliamentary Secretariat.

Experts said the latest draft Bafia, although “progressive”, will be a setback when it comes to Nepal Rastra Bank’s (NRB) initiative launched some six years ago to ensure good corporate governance in BFIs.

An NRB directive has already adopted the provision on term limit for chairmen and CEOs and the regulator has been seeking to insert the provision in the Act to establish a norm.

“Now, it will be challenging for the NRB to curb anomalies in the financial industry,” said an NRB official. “NRB is of the view a person holding the position of chairman or CEO for a longer period could affect governance.”

The bill, however, has put in place more stringent provision for funds misappropriation. 

As per the final draft, those involved in embezzlement could face imprisonment from 6 to 12 years.  

The bill has also provisioned allocation of 0.5 percent of publicly issued shares of BFIs to their employees. As per the existing Act, BFIs can allocate 5 percent of the shares to employees during initial public offering.

However, the draft scrapped the provision stating such an allocation will reduce the general public’s holding. The members of Finance Committee came to a conclusion that BFI employees too have the right to hold shares of the organisation they work for.