Print Edition - 2016-09-27 | MONEY
Wagle submits report on retirement provision
Sep 27, 2016-
The contents of a study on the pros and cons of amending the central bank’s compulsory retirement provision have not been revealed, but its author former government secretary Bimal Wagle said his recommendations were “implementable” and that he could “defend each and every word” in it.
Nepal Rastra Bank (NRB) had assigned Wagle to examine whether the retirement provision should be changed or not after employees expressed dissatisfaction over it. The research report was submitted to NRB Governor Chiranjibi Nepal on Monday.
The central bank commissioned the study after a number of employees demanded that the rule requiring them to retire after 30 years of service be scrapped. Currently, NRB staff must retire after 30 years of service or after reaching the age of 58, whichever comes first.
If the provision on compulsory retirement after 30 years of service is removed, employees will be able to work till the age of 58 regardless of the number of years of service. For example, an employee who joined the bank at the age of 20 will be able to serve the institution for 38 years, which means he or
she will keep the job for an extra eight years.
Those favouring limiting the length of service to 30 years say that scrapping this rule will allow “older and especially unproductive staff” to continue working, thereby reducing the intake of “younger, smarter and techno-savvy” people.
“In this globalised world, Nepal’s financial sector has no choice but to continue integrating with the global financial system. The central bank, which also regulates banks and financial institutions, should remain strong. And there should be no backtracking on this front,” Wagle told the Post, adding, “I’ve made recommendations along these lines.”
NRB had introduced the provision on retirement after 30 years of service around 11 years ago as part of the Financial Sector
Reform Programme launched in December 2000. The programme was launched after two state-owned banks—Rastriya Banijya Bank and Nepal Bank Limited—became technically bankrupt, accumulating losses to the tune of around $450 million. The amount was equivalent to around 46 percent of the government’s annual budget and around 8.6 percent of the Gross Domestic Product (GDP) then.
The two banks, considered too big to fail, had big holes in their balance sheets, as the board of directors and management took politically-driven decisions and accepted overvalued or inferior assets as collateral from borrowers seeking loans.
Also, there were serious flaws in the entire lending process, which led the banks to accumulate huge bad debts.
While these two banks were on the verge of collapse, NRB failed to regulate their activities properly as the regulatory body did not have quality human resources to do so or overlooked the problems due to political pressure.
Against this backdrop, the Financial Sector Reform Programme had also stressed the need to strengthen NRB and let it work as an autonomous body.
“The Financial Sector Strategy adopted by the government of that time has time and again mentioned NRB. The strategy also clearly says NRB should operate as a professional body with competent people, and it should emerge as one of the premier institutions in the country,” said Wagle. “My recommendations fully address these concerns.”
NRB currently employs 1,286 persons, among whom 755 are officers and 531 are non-officer-level staff. Around 365 employees are due to retire in the next three years, and 300 among them will be leaving because they have completed 30 years of service even though they are less than 58 years old.
According to NRB officials, 80 percent of the staff due to retire do not have proper educational qualifications or possess qualifications different from those stipulated by NRB.
“These people are now exerting pressure on the top management to scrap the provision on compulsory retirement after 30 years of service so that they can continue working,” senior NRB officials told the Post on condition of anonymity.
If management heeds their advice, it may not be able to hire fresh blood who are better educated and techno-savvy in the coming years as employees of the older generation will not make way for them, an NRB official said.
“The removal of the cap will also bar competent younger employees from climbing up the career ladder at a desired pace as most of the senior posts will be occupied by older employees.”
Published: 27-09-2016 09:36