"Loans that have been extended for 20 years can´t be recovered within the deadline given by the central bank," said Jhapat Bohara, president of the Development Banks´ Association said. [break]
Nepal Rastra Bank had issued a directive to development banks last year, asking them to recover loans extended to borrowers outside their assigned geographical areas within mid-July 2011. This provision was directed at development banks that were licensed to operate in one or three districts.
All development banks no matter whether they are allowed to operate nationwide or within limited districts should be allowed to extend loans all over the country, Bohara said at an interaction organized by Society of Economic Journalists Nepal (SEJON) on Monday.
Bohara also expressed dissatisfaction over the failure of the newly announced monetary policy in addressing their long-running demand of allowing them to issue guarantees. "In addition, our demand of authorizing nationwide development banks to issue Letter of Credit (LC) has also been not incorporated in the policy," he added.
He also urged the central bank to allow development banks to maintain obligatory deposits at commercial banks so that it can help them to increase their level of profits.
Our demands of permitting development banks to act as an issue manager of shares and cash fund manager at district level have also not been met, the association said. “Not only the deposits held by micro finance banks, all the deposits held by the financial institutions need to be guaranteed,” Bohara said.
The association has also expressed its objection toward the new provision that requires financial institutions to take permission from central bank to open a new branch.
Bohara said the provision that allows promoters having more than one percent of equity investment take loan equivalent to 50 percent of the market value of the shares is impractical and that provisions like there were responsible for the downturn in the share market.
He, however, welcomed some of the provisions of the monetary policy, stating that they were directed at deprived sectors. The policy of extending interest-free loans to establish branches at 22 districts with low presence of financial institutions is a good step, he said.
Bohara also urged the central bank to expand its inspection and supervision capacity to regulate 82 development banks that have been licensed by NRB.
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