The government’s plan to have at least one bank branch in each local administrative unit looks unachievable unless basic infrastructure like motorable road, electricity, internet and security can be provided immediately in unbanked areas.

Commercial banks have asked that the government first make its presence felt in unbanked regions by constructing infrastructure before they will start opening branch offices, according to Nepal Rastra Bank (NRB).

“There demand is genuine,” said Nar Bahadur Thapa, executive director of the central bank. “We must have basic infrastructure in place before we tell commercial banks to open branches.” 

The government must immediately start building infrastructure so that commercial banks can expand their branch network 

and make it possible for financial transfers to be made directly into the bank accounts of all local units as planned by the budget statement for the current fiscal year, Thapa added. 

“Necessary arrangements will be made to open at least one bank branch in each rural municipality and municipality,” the budget statement said. “Arrangements will be made to keep the local consolidated fund in commercial banks and electronic data of such funds at the Financial Comptroller General’s Office.”

Currently, there are commercial bank branches in only 332 of the 744 local administrative units, according to NRB. In order to implement the government’s plan, the country’s 28 commercial banks will need to open at least 412 new branches.

The presence of commercial banks in Provinces 6 and 2 is very low with only 19 and 28 percent of the local units respectively having a bank branch. Provinces 3 and 5 are in a better position as there are bank branches in 61 and 62 percent of the local units here. 

NRB has urged commercials banks to start preparations to open branches in the 412 local units lacking bank branches, but bankers said they would establish branches in 250 locations in the first phase.

“The Nepal Bankers’ Association (NBA) has sent us a list of 250 places where they will open branches immediately,” said Narayan Prasad Poudel, spokesperson for NRB. “We will sit with them again to find ways to establish branches in the remaining 162 local units.” 

In a bid to incentivise commercial banks to open branches in unbanked regions, NRB announced recently that banks setting up branches in unbanked places would enjoy a monopoly for three years. 

“No other bank will be allowed to open branches for three years,” said Poudel. “We made this decision following the NBA’s request.”    

Bank’s network

Province Local commercialunits banks

1 137 56 (41%)

2 127 36 (28%)

3 119 73 (61%)

4 77 44 (57%)

5 133 83 (62%)

6 63 12 (19%)

7 88 28 (32%)