Ministry of Federal Affairs and Local Development (MoFALD) has requested the Finance Ministry to make an arrangement whereby recently established local bodies are allowed to maintain their accounts with any financial institutions located in their area. The (MoFALD) made such request as 411 out of 744 local bodies do not have presence of commercial banks.

The government while announcing the annual budget from the coming fiscal year had introduced a provision under which budget allocated to the local bodies would be sent directly to their bank accounts opened with a commercial bank.

“Necessary arrangements will be made to open at least one branch of the commercial banks in each rural municipalities and municipalities,” read the budget speech. “Arrangements will be made to maintain the local consolidated fund in commercial banks and obtain the electronic data of such fund in the Financial Comptroller’s Office.” After introduction of such provision in the budget, the Finance Ministry and Nepal Rastra Bank (NRB)—the central monetary authority of the country—urged the commercial banks to start opening branches at the local bodies.

“But, with less then week left for the new fiscal year to begin, it is almost impossible to open more than 400 branches at many locations,” said Dinesh Kumar Thapaliya, secretary at the MoFALD. “Therefore, we have requested the Finance Ministry to issue a directive with a provision that allows local bodies to maintain their accounts with development banks or finance companies having branches in their area to spend the budget allocated for them or deposit their earning.”

The NRB which has taken initiative for the branch expansion of the commercial banks is also of the view that Finance Ministry should made arrangements under which the local bodies are allowed to run by maintaining accounts at any financial institutions operating in their area. “We have asked the commercial banks to go to the area where there is no presence of commercial banks. But, it will take some time for the commercial banks to open such a large number of branches,” said Narayan Prasad Poudel, executive director at the NRB. “Therefore, the Finance Ministry should make temporary arrangements under which the local bodies are allowed to conduct transaction with their accounts at development banks or finance companies.”

Nevertheless, the central bank will keep on pushing commercial banks to expand their outreach to local bodies with no commercial bank presence, Poudel added. “The NRB through its upcoming monetary policy, is making an announcement of incentives for commercial banks willing to open a branch at the local bodies,” said Poudel who would not share details of such incentives.