Bankers concern about proposed BAFIA amendment

Amendment back tracks the liberal economic policy

Nepal Bankers Association (NBA) has termed the proposed amendment of Banks and Financial Institutions Act (BAFIA) as a regressive step as it has not only tried to back track liberal economic policy but also curtail the central bank and private sector's roles.
“It is a policy reversal," said vice-president of Nepal Bankers Association Rajan Singh Bhandari. "It has also tried to encroach the territory of the central bank," he said, adding that the proposed amendment will clip the regulatory wings of the central bank and discourage the private sector investment.
"With such draconian proposal, no new investment will come," said former NBA president and CEO of Kumari Bank Radhesh Pant. "The overall economy will suffer due to such Act," he said, adding that the proposed reduction in the single promoter share could lead to a crash in the secondary market due to over supply.
"The promoters have to off load their shares flooding the secondary market that could bring the share prices to the lowest level," said Sudhir Babu Khatri, president and CEO of DCBL Bank.
The proposed amendment is going to create lots of confusions, according to the bankers. The cap on CEO's salary — the much controversial issue lately — CEO and director's roles and repsosibilities, hike in deprived sector lending and venture capital are some of the issues the bankers showed serious concern over.
"The Act should not categorically mention percentage and fix ceilings as it would create practical hurdles in the future," suggested CEO of Lumbini Bank Shovan Dev Pant. "The Act should be forward looking," he said, adding that the proposed amendment has, but, back tracked the liberal economic policy adopted by the country some two decades ago.
"It has also included the clauses that could be addressed by Nepal Rastra Bank's directives and Act," Bhandari said," The NRB Act and proposed amendment will contradict each other.
The proposed amendment has also discouraged the industrialists to open banks and financial institutions to avoid conflict of interest, which is principally correct. However, Bhandari asked, “If not the entrepreneurs, who has the money to be the promoters?"
The CA members have suggested amendments after discussions in Parliamentary sub committee but it seem to be guided through their political affiliation rather than economic sense, according to the bankers.