NRB not to spare rule flouters

The central bank might have some weaknesses but it will take stern action against those who flout the rules, said Nepal Rastra Bank (NRB) governor Dipendra Bahadur Kshetry at an interaction on 'Non-Performing Assets and its implication' organised here today by a monthly magazine 'Eikyabadhata'.
"The central bank is the regulatory and monitoring authority of the financial market. It gives a chance to financial institutions to revive, if they are genuine, but the central bank cannot remain silent. If necessary, it takes stern action also," Kshetry added.
He opined that Nepal Development Bank (NDB) was given enough time to improve its finaacial health and internal management but during the last two years, its financial and managerial health deteriorated further forcing the central bank to send it into liquidation. For the sound health of financial institutions, they should take care while floating loans. "The process of floating loan has created more bad loans -- the cause of NDB's present condition -- as loans are not floated according to norms but under political pressure and ill-intention," he said adding that the committee formed to identify big loan defaulters is active and has already submitted two reports to the central bank.
Acting accordingly, the central bank has frozen the bank accounts of 121 big loan defaulters -- including 21 debit and credit cards, seven lockers and one fixed account that has Rs 6 lakh -- till Baisakh. According to the amended rule, Rs 10 million and over defaulters are big loan defaulters. Earlier, loan defaulters over Rs 50 million were the big loan defaulters.
During the interaction, bankers agreed that they would have to maintain integrity while floating loans. "If we maintain integrity while floating loan, there won't be bad loans," they said.
"A banker knows better at the time of issuing the loan whether it is a bad loan or not," said Anil Shah, vice-president of Nepal Bankers' Association (NBA) and CEO of Nabil Bank. "Risk analysis should be strenghtened to reduce NPA," he said. "The central bank should bring the carrot-and-stick rule," he suggested urging to improve the quality of the bankers.
Jhapat Singh Bohara, president of Nepal Development Banks' Association and CEO of Malika Bikas Bank also agreed that norms should be followed. He accused big borrowers of wilful default.
CEO of Agriculture Development Bank Ltd Janak Raj Shah concurred, saying, "Small borrowers do not default on loans. It is the big and politically-backed borrowers who default on loans," he said adding that bankers should be held responsible for loan default.
Ramesh Bhattarai, chief administrator of Employment Provident Fund (EPF), however, blamed the central bank delaying in taking action against NDB. "The central bank should have acted 10 years ago," he said remembering his bad-experience as a director in the NDB.
EPF has 10 per cent, NRB has five per cent, Beema Sansthan has five per cent and IDBI-India has 10 per cent promoters' share in ailing NDB.