Minister for Finance Bishnu Prasad Paudel tabled the bill in the parliament on Sunday, aiming to establish greater financial stability and corporate discipline in the banking industry. The proposed amendment to BAFIA puts a ban on board of directors of any BFI from taking the post for more than two consecutive terms.The provision announced by former Nepal Rastra Bank (NRB) Governor Yubaraj Khatiwada through Monetary Policy for Fiscal Year 2014/15, however, was put on hold due to lack of necessary laws for enforcement.
Bankers have been vehemently opposing such provisions. They have even demanded that the provision be scrapped. "As this prohibitory provision bans BFIs from appointing their institutional promoters as board directors for more than two consecutive terms, this should not be incorporated in the proposed law," NBA had said in its charter of suggestions submitted to the government in November last year.
Some stricter provisions also appear in the draft amendment bill to ensure corporate discipline in BFIs. Terming the act of setting up a proxy borrower by promoters, board of directors, CEOs or other authorized officials of BFIs with an intention of misusing the loans illegal, it also states that floating of loans to borrowers having any financial interest with the promoters, board directors, CEOs or other authorized officials of BFIs will also be considered a banking offence.
The amendment, however, has relaxed the provision that barred defaulting or blacklisted borrowers from opening bank accounts, withdrawing money or making payments through check. The draft proposes making Dhukuti a banking offence.
Dhukuti is an unauthorized deposit and loan scheme that is typically run by a group of people who deposit a certain amount of money at regular intervals and use the money on rotational basis.
"No one shall be allowed to run the Dhukuti scheme," reads article 14 (A) of the draft. The bill also proposes one to nine-year jail term for those involved in the scheme.
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