Bankers oppose salary ceiling

The bankers showed their serious concern over the central bank's move to fix the perks and benefits of the chief executive officers (CEOs), directors and other high-ranking staffers.
"The central bank's move to make the perks and benefits transparent is weclome," told Sashin Joshi, president of Nepal Bankers Association (NBA) and CEO of NIC Bank here today talking to scribes. "But to fix it is not practical," he said adding that banking is one of the most competitive sectors in Nepal at present. "Such move might start brain-drain in banking sector," Joshi added.
The Monetary Policy for the fiscal year 2010-11 -- announced yesterday by Nepal Rastra Bank (NRB) -- has hinted at controlling perks and benefits of chief executive officers (CEOs), directors and other high-ranking staffers to make it compatible with economic condition of the country.
"Pays and perks should be tied up with performance," suggested Rajan Singh Bhandari, vice-president of NBA and CEO of Citizens Bank Nepal.
The bankers were also concerned over the central bank's interference in the open market. "Reading between the lines, it seems the central bank also wants to control rates," they said adding that the market decides the rates, not the central bank. However, the bankers have themselves, recently, formed a 'gentlemen-agreement' on rates. Though, they claimed that the 'gentlemen-agreement' was not to let the rates go over the board.
The bankers think that increasing the Statutory Liquidity ration (SLR) after adding money at bank's vault is positive move but NRB's indication to dictate rates and fees is not according to the free market economic policy that Nepal is towing.
"The Policy has also failed to clarify how it's going to encourage Merger and Acquisition (M&A), though its a welcome move," Joshi said adding that the tax policy and labour law need to be clear to encourage the M&A. "Similarly, deposit insurance is a good move but it might send wrong message."
The bankers also called the central bank not to discourge Interbank deposits and bring the foreign institutional investors in the capital market, apart from strict regulation on credit cooperatives.
The central bank has apart from Early Warning Signal (EWS) to further strengthen the banks and financial institutions brought -- for the first time -- stress testing, which would predict the impact of economic ups and down in the financial system.
The domestic banks carry high credit and liquidity risks, according to International Monetary Fund (IMF). "Some banks are even facing high solvency risk," the IMF added.
The formal announcement of the Monetary Policy has a very short history of less than a decade in Nepal. But it used to be announced after the budget to support the fiscal policy. This time, it has been announced before the budget and is broadly based on Three Year Interim Plan (2010-2013).