“The committee has been entrusted the responsibility of formulating a five-year strategy for NRB, as restructuring of the state will call for readjustment in NRB structure and enhancement in its capacity accordingly to fulfill its responsibility,” said NRB Governor Dr Yuba Raj Khatiwada.[break]
Addressing a function organized to mark 56th anniversary of NRB on Wednesday, Dr Khatiwada admitted that the central bank´s supervisory capacity was not up to the mark to monitor and supervise banks and financial institutions (BFIs) in different parts of the country. In an alarming note, Governor Khatiwada disclosed that some of the BFIs are in a bad shape and suggested the customers to deposit savings only after studying their financial position.
He attributed the problems in the BFIs to poor corporate governance and anomalies by promoters themselves. “If promoters show vested interest in banking operations, how can we expect banks to function healthily?” wondered Dr Khatiwada, adding that NRB´s has the policy of not taking over the BFIs that are damaged by the promoters themselves.
He also stressed the need to fine-tune fiscal and monetary policy to contain the existing inflation and balance of payment (BoP) deficit.
Statement distributed at the program said that inflation in mid-March has jumped again to 10.7 percent. It was 10.2 percent in mid-February. Likewise, BoP deficit has widened to Rs 11.30 billion during the first eight months of 2010/11.
As a result, country´s foreign currency reserve has plummeted by 4.4 percent to Rs 257.04 million in mid-March 2011, compared to mid-July 2010.
“Exports increased by 6.6 percent during the period and imports growth too has been contained at 1.2 percent. However, export-import ratio still stands at 16.9 percent, which is not satisfactory,” said Dr Khatiwada.
Governor Khatiwada also raised concern over continued low growth in deposits in the banking system and credit-deposit imbalances.
According to the statement, commercial banks mobilized just Rs 12.14 billion in additional deposits, whereas their investment and loans jumped by Rs 54.24 billion during the first eight months of 2010/11.
Dr Khatiwada also informed that necessary exercises have already been completed to appoint chief executives in Rastriya Banijya Bank (RBB) and Nepal Bank Limited (NBL) through open competition.
“The terms of reference of CEOs and criteria for their selection have already been finalized and forwarded to those banks (RBB and NBL),” he added.
Likewise, the central bank has also endorsed a clear roadmap for recapitalization of NBL and handing over its management to the new board of directors by mid-January 2012.
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